March 28, 2024

Property taxes

I just finished going through “tax shock” after viewing my latest property tax bill. My $700 year-over-year increase on top of 9 percent inflation at the check-out line impacts daily life. Many of you share my pain.

John Hendrickson, policy director for ITR Foundation, and Rusty Cannon, president of the Utah Taxpayers Association, describe something I believe we need to explore in the Iowa Legislature.

The Tax Foundation’s 2022 State Business Tax Climate Index ranks Utah with the seventh lowest property tax burden in the nation, while Iowa is ranked 39th in the nation. Utah’s ranking has improved, while Iowa’s has fallen. High property taxes are not just harmful to individuals and families, but they also discourage economic growth. This is especially true for small businesses and burdensome property taxes can serve as a deterrent to entrepreneurs who wish to start a business.

Property tax reform is difficult in Iowa because it is exclusively a local issue. Utah’s Truth-in-Taxation law is considered one of the most taxpayer-friendly property tax laws in the nation. The Truth-in-Taxation law is a revenue-based limitation, which means as valuations increase, property tax rates decrease.

Utah’s Truth-in-Taxation law guarantees that each taxing entity receives the same property tax revenues as the previous year including new growth. This prevents local governments from getting a windfall because valuations have increased. Truth-in-Taxation works to prevent local governments from benefitting from increased assessments. If assessments increase by 10 percent, it does not mean that local government budgets should increase by 10 percent.

If a local government wants to exceed the certified tax rate, it then requires a Truth-in-Taxation hearing that is accompanied by an extensive direct notification and public hearing process. Truth-in-Taxation also forces local government officials to take recorded votes to approve an increase in tax collections.

Through the Truth-in-Taxation process, local governments must justify why they want to increase taxes for additional spending, forcing them to be more transparent as to why they need additional tax revenue. A crucial aspect of Utah’s law is a direct notification requirement, where notices are sent to taxpayers, providing information on the proposed tax increase and how much their tax bill will increase. It also includes the date, time, and location of the Truth-in-Taxation budget hearing. This extensive public notification and hearing process has been successful, and taxpayers in Utah actively participate in Truth-in-Taxation hearings.

Certainly an idea that could eliminate that yearly “tax shock.” Let me know what you think.