Property Tax Assessment in Iowa: Changes With HF692

Legislation passed in 2003 by the Iowa General Assembly would, if fully implemented, significantly alter the process by which the taxable value of Iowa property is determined. This report explains both the prevailing system of assessment and the changes implicit in the 2003 legislation, HF692. It also addresses how HF692 could affect incentives facing property owners, growth of taxable valuations, distribution of property taxes among classes of property, debt and revenue ca-pacities of local governments, TIF district revenues, and state school aid. It further reviews the main effects of implementing HF692 and the problems that would arise in doing so. IowaÕs Property Taxes: The Current System Property taxes account for a large share of taxes collected by IowaÕs state and local governments. They are the main source of revenue of IowaÕs local governments. Total property tax levies increased some-what faster than inflation between 1979 and 2002; inflation-adjusted (real) taxes increased 14.8 per-cent. Inflation-adjusted state-level taxes increased more rapidly — 38 percent. Property taxes accounted for 42.7 percent of total state-local taxes in FY 1979, but only 38.3 percent in FY 2002. Property taxes have thus become a less important source of revenue; sales and individual income taxes have become more important (and in fact are used to finance property tax relief)