DES MOINES (AP) — The Republican-controlled Iowa House on Wednesday approved a version of Gov. Terry Branstad’s plan to cut commercial property taxes, setting up a battle with the Democratic-led Senate, which favors an alternate proposal.
In a 54-45 vote, the House agreed on a version of a Senate tax proposal that was amended to include key items from Branstad’s plan, which gradually reduces taxable assessments for commercial and industrial property owners by 20 percent. The state would provide funding to local governments to make up lost tax revenue. The proposal from the Republican governor also would slow the growth of residential and agricultural assessments.
The House version also includes a provision that would have the state pay a larger portion of general school funding — a move designed to reduce local property taxes — and one that would have the state use surplus budget funding to provide income tax breaks.
Rep. Thomas Sands, a Republican from Wapello, who chairs the House Ways and Means committee, said the overall House package would provide tax relief to Iowans.
“You have to look where the money is going, it’s going to the taxpayers of Iowa,” said Sands.
The Senate has approved a different property tax plan. Their proposal gradually provides commercial property owners with a tax credit equivalent to a roughly 40 percent tax cut to their first $324,000 in assessed property value.
House Democrats argued in favor of the Senate plan, saying it would help small businesses and be more fiscally responsible.
“The Senate version of property tax relief targets Iowa companies. The same cannot be said of the House version,” said Todd Prichard, a Democrat from Charles City.
The legislation will now go back to the Senate. Given the differences between the two sides, the issue may move to a joint committee where lawmakers from both chambers try to reach a compromise.
According to the non-partisan Legislative Services Agency, Branstad’s plan will cost an estimated $339.5 million annually when it is fully funded in the fiscal year that starts July 1, 2017. The House provision that the state pay more school funding will add additional costs of more than $300 million in that fiscal year, with the number continuing to grow in subsequent years.
The Democratic plan, which would not be funded in weak budget years, would gradually increase the amount given to the credit, capping it at an annual $250 million.
A spokesman for Branstad says the administration is hopeful the legislature can reach a compromise.
“It is unclear what the resolution will look like, but it is imperative to accomplish property tax reform in order to enhance economic development in Iowa,” said Tim Albrecht in an emailed statement.