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ICYMI: Plan approved to make cuts in commercial property taxes

February 15, 2012 J

We applaud the Iowa House of Representatives for passing property tax relief for all Iowans. AFP-Iowa Director Mark Lucas noted that “this bill will make Iowa more attractive for new business and lessen the burden on residential property owners.” Find the following article in its entirety here (via the AP).

DES MOINES, Iowa — The Iowa House on Tuesday approved a measure that would cut property taxes paid by businesses nearly in half over eight years.

Backers say the move will boost Iowa’s economy because the state’s commercial property taxes are far higher than neighboring states.

But some lawmakers say a big cut in business property taxes will punch a giant hole in local government budgets. They estimate it will cost local governments $357 million over the life of the measure, amounting to the largest tax shift in the state’s history.

The House approved the package on a 59-38 vote, sending it to the Senate. Democrats who hold a majority in the Senate say they’ll push a property tax cut that targets small businesses.

Republican Gov. Terry Branstad supports the House plan and bargaining is likely to continue throughout the session.

Rep. Tom Sands, R-Wapello, the measure’s main sponsor, said there is stark disagreement on the issue.

“You believe in government and we believe in people,” Sands said. “This plan is not irresponsible and it is not extreme.”

Rep. Dave Jacoby, D-Coralville, said, “Iowans need and want a consistent and balanced tax system. There’s no true tax relief here, you are just shuffling the deck.”

Business property in the state is currently taxed at 100 percent of its assessed value, and the measure approved Tuesday would gradually lower that to 60 percent. Backers say the proposal also increases state spending to replace the lost property tax revenue. That spending begins at $100 million a year and eventually grows to $240 million a year.

Critics argued the overall impact of the measure would cut local property taxes by $1.2 billion but give local governments a little more than $800 million to replace it.

Sands argued that property tax collections have grown by 68 percent over the last decade.

“We have seen across the state that property tax increases are growing faster than the rate of inflation and that means they are growing faster than people’s ability to pay,” he said.

While the measure focuses on business property taxes, it gives a break for all classes of property in another section. Local school budgets are a mix of state dollars and local property taxes, with the state currently paying 87.5 percent of the tab. The measure would gradually increase that to 100 percent.

Critics argued that cutting business property taxes by 40 percent gives an enormous windfall for big corporations, many from out of state. Democrats issued a study showing Wal-Mart would get a $7 million cut in property taxes while Home Depot would see a $1.2 million cut.

“In the House, they are voting on the biggest tax giveaway to out-of-state corporations in the history of the state of Iowa,” said Sen. Joe Bolkcom, D-Iowa City.

Bolkcom said Democrats who run the Senate have crafted a far more targeted plan, taxing businesses increasingly at the rate for residential taxes, which is lower than commercial taxes.

When fully phased in, the first $390,000 in assessed value of a company would be taxed at residential rates, which Bolkcom said would cover 83 percent of the businesses in the state. It would give larger business a tax break as well, because the first $390,000 of their assessed value would be taxed at residential rates.

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