New Iowa Speaker stresses property tax cuts
JOHNSTON - The new speaker of the Iowa House said Friday that lawmakers need to find ways to cut property taxes for businesses.
"It doesn't matter if you're in small-town Iowa or if you're in Des Moines, it seems like every business owner understands this issue," Rep. Pat Murphy, D-Dubuque, said. "They see a much bigger tax increase every year and it's passed on to the consumer."
Murphy, who’s House Democrats, gained a majority in the election last week, laid out his agenda on the Iowa Public Television program "Iowa Press." He appeared with Rep. Kevin McCarthy, D-Des Moines, the incoming House majority leader.
The property tax problem stems from a decades-old rule called the rollback, which limits the annual growth of property taxes for homeowners. Homeowners now pay taxes on less than half of the assessed value of their property, while businesses pay taxes on the full value. The disparity is expected to continue to grow unless the rule is changed.
"The state just needs to step up and respond to this," Murphy said.
He said the first step is to gather tax experts to study the issue and recommend different options. He hopes to have something to show for it this year or next, before the problem gets much worse.
"I think we're already getting to the point where we are in big trouble" because of high property taxes for businesses, Murphy said.
There are several schools of thought about how to deal with the issue:
* Expand the rollback so businesses get the same tax break as homeowners. This is fiercely opposed by local governments because it would reduce their tax base.
* Increase the state share of school funding, so local governments can cut property taxes for everyone. This might require an increase in the state income tax or sales tax, unless the state has a big surplus from some other source.
* Gradually reduce the rollback, which would shift some of the tax burden from businesses to homeowners. This is only popular with a few economists and is politically unpalatable to both parties.
Murphy said it's too early to know what approach might find majority support.
Republicans had a majority in the House for the last 14 years and made several attempts to change the property tax system. Also, outgoing Gov. Tom Vilsack made the issue a high priority for several years. Despite a lot of talk, neither the governor nor legislators were able to do much.
Rep. Jamie Van Fossen, R-Davenport, was one of the leaders in searching for a solution. He said the problem is big and complicated, so potential cures are easily tripped up.
"You can have a plan, but it's hard to get it passed," he said.