Proposal to slash tax bills for apartment complex owners would force communities to cut crucial services

Not sure if there is a way to make that headline “sexy.”  If there is, I certainly couldn’t find it.

The general push by republicans in the Iowa legislature is to reduce property taxes on businesses in the state.  This would force municipalities to tax their residential property owners at higher rates or reduce critical municipal services.  There are many aspects of this push, so for simplicity’s sake, I’m just considering the 11th hour proposal to tax rental properties at the same rate as residential properties.

Iowa City anticipates tax reform losses in the millions by Mitchell Schmidt in the Iowa City Press Citizen, May 8, 2012

The reform would reduce apartment complex taxes from a 100 percent on valuation tax — similar to commercial and industrial properties — to a residential tax, which is about 51 percent of the value with the help of state rollbacks.

In Iowa City, the estimated loss is anticipated conservatively at $2.8 million lost a year.

“That translates to between a seven and 10 percent drop in our general fund,” Hayek said during the call. “That is significant.”

Why a profit making enterprise should be treated as the equivalent of a private residence is beyond me.  And keep in mind that this push to lower revenue is coming at the same time that Iowa House republicans seek to decrease state funding in a variety of areas.

Iowa Senator Rob Hogg (D-Cedar Rapids) points out that starving government will ultimately lead to a less business friendly environment:

UPDATE: Two Democrats vote no; Is Iowa’s property tax reform dead? by Jason Clayworth in the Des Moines Register, May 8, 2012

Two key Democrats have voted against the Senate’s business property tax reform bill, creating further uncertainty to what currently appears as legislative gridlock on one of this year’s key issues.

Sen. Rob Hogg, D-Cedar Rapids, voted against the bill in a committee meeting this afternoon saying governments are already not meeting their basic obligations to protect the public in such areas as flood mitigation. He says cutting their future revenue collections is wrong.

“You know what destroys businesses? When government fails to do its job and protect people and property from basic things like natural disasters,” Hogg said, noting that 31 feet of floodwater in 2008 caused the city to lose more than 200 businesses.  (Emphasis added)

Who is asking for the tax cut for apartment owners is an open question.  The governor maintains that that provision was added at the behest of Senate Majority Leader Mike Gronstal (D-Council Bluffs).

Governor says tax break for apartments is a compromise with Democrats from Radio Iowa, May 8, 2012

The mayors of the 10 largest cities in the state spoke out today against that portion of the property tax reform plan, but Branstad says Senate Democrat leader, Mike Gronstal pushed for it.

“This is Senator Gronstal’s priority, so we had to reach a compromise. It wasn’t in my original recommendation, but to get something done we need to do something. And look at it from a fairness perspective. Is it fair to people who live in apartment houses to have to pay higher taxes than people who live in other residences? I don’t think it is,” according to Branstad.

To answer the governors question: I think that it is disingenuous to suggest that savings on property taxes for apartment owners would be passed on to tenants.  If the state would like to ensure lower rents for renters, I would suggest a model such as regulation rather than relying on a ridiculous trickle down prayer.


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