Property taxes remain a significant concern for Iowa taxpayers and are a hindrance to economic growth. Taxpayers are demanding meaningful property tax relief, and that will only occur when legislators address the cause. Limiting local government spending is the most effective solution for property tax relief.
Over the past 20 years, property taxes in Iowa have increased by close to 110%, surpassing the growth of inflation and population. From fiscal year 2025 to the start of fiscal year 2026, total property tax collections from school districts, cities (with populations over 1,000) and counties will grow by $239.8 million, or an increase of 3.9%. Within the past two years, property tax collections have increased by over 10%. Local governments will collect a combined $6.4 billion in property taxes in fiscal year 2026.
Policy makers must consider a property tax reform measure that will limit government spending. Applying a 2% budget or levy limit would help slow the growth of spending.
New York, which is not a tax-friendly state, has adopted a property tax cap that limits the growth of property taxes to 2% or the rate of inflation, whichever is less. The cap has provided tax relief for taxpayers.
A well-designed property tax limit will apply to all spending and avoid exemptions, including not allowing for inflation. Further, establishing a 2% cap would force local governments to not only address their spending, but also justify their need for new spending.
In addition to limiting spending, the Legislature needs to reform the failed property tax budget statements that are sent to taxpayers. Property tax statements are a crucial part of enhancing property tax transparency, accountability, and encouraging citizens to be engaged in the local government budget process. The poor design of the statement contains inaccurate information and creates unnecessary problems.
Legislators can easily solve this problem by duplicating Minnesota’s property tax statement. Minnesota provides its taxpayers with a clear and concise statement. The goal of the property tax statements is to provide information on property taxes, the date, time, and location of the budget hearing, and most importantly informing the taxpayer on how their bill will be impacted.
Finally, local governments must begin to reform their governments, just as Gov. Kim Reynolds has initiated reform of state government. This fall, the governor’s DOGE task force will provide recommendations that, hopefully, will help provide ideas to bring reform to local government.
Looking ahead to the 2026 legislative session, Reynolds has indicated that property tax reform will be a priority. Reynolds recognizes that local governments must embrace fiscal conservatism and undertake reform if meaningful property tax relief is to be achieved.
Iowa has made considerable progress lowering the income tax burden, but property taxes still hinder growth. The albatross of high property taxes is not only harmful to residents, but small businesses as well.
Why is property tax reform so difficult? It is difficult because the solution resides in limiting spending. Regardless of the tax, government spending drives taxation.
Matt Everson is the Iowa director for the National Federation of Independent Business. John Hendrickson is policy director for Iowans for Tax Relief Foundation
This article originally appeared on Des Moines Register: Spending drives property tax increases. A cap is the only way to stop it. | Opinion
Reporting by Matt Everson and John Hendrickson / Des Moines Register
USA TODAY Network via Reuters Connect
