Iowa House Republicans released the latest iteration of a potential property tax compromise Thursday — but a final solution is yet to be found as majorities in both chambers and the governor continue negotiations.
House Speaker Pat Grassley shared information with reporters Thursday about the amendment House Republicans have proposed for House File 2745, which he said was an “extremely reasonable” compromise between the House, Senate and governor’s proposals.
The amendment would keep the 2% “hard cap” on revenue growth in place, as supported by the House GOP and governor’s plans. It would speed up the equity transfer from the Secure an Advanced Vision for Education (SAVE) funding, currently dedicated to school infrastructure, to go toward property tax relief beginning with 12.5% in fiscal years 2026-2027, ratcheting up to 25% in FY 2030-2031.
Grassley said the bill also attempts to combine the different proposals being discussed by converting Iowa’s existing homestead tax credit to an exemption and tripling the exemption to $15,000, but keeping in place current exemptions for seniors, veterans and people with disabilities. The $175 million that currently funds the homestead tax credit would go toward lowering the $5.40 uniform levy set for school foundation property taxes.
While changing this tax credit to a tax exemption would result in taking certain value out of the tax base for local governments, Grassley said the money is being reinvested from the state in lowering local costs by offsetting the $5.40 levy.
“While that is a reduction to the local governments, it is going to be used to benefit the property taxpayer,” Grassley said. “It isn’t floating back into the state, because that’s currently a general fund appropriation for that credit in the standings — so the money’s not coming back to us. We’re going to flow it back out through the buy down.”
The measure also incorporates other provisions within previous property tax proposals, like limitations on Tax Increment Financing (TIF) districts, the creation of a $10 million grant to help local governments in consolidation efforts and shared service agreements, as well as creating the FirstHome Iowa Accounts mirroring the Iowa 529 Plan.
Grassley said the measure would both provide relief to Iowa homeowners immediately through the lowered levies, while also restricting future increases through measures like the revenue growth cap. He said the amendment represents a sincere effort from House Republicans to reach an agreement with Senate Republicans and the governor.
“I think if you look at what the House is willing to propose here, and including these changes, this is a serious step forward in the right direction,” Grassley said. “And this is something that should be taken very seriously as a potential compromise.”
Substantial differences remain between House and Senate bills
The new amendment builds from a March attempt by House Republicans to craft a deal. But it still remains significantly different from Senate File 2472, Senate Republicans’ property tax proposal, which passed the chamber with bipartisan support earlier in April.
The Senate measure was also amended to include changes that Sen. Dan Dawson, R-Council Bluffs, who has led the bill in the Senate, said show a willingness to work toward a solution. The earlier version of the Senate bill proposed eliminating Iowa’s “rollback” system for calculating property taxes, while the amended proposal makes adjustments to this system, and sets a “soft cap” on local government levy systems, with some exceptions.
Where the House proposal calls for eliminating the homestead tax credit, the Senate measure would increase the state’s homestead tax credit for all Iowans to 50%. It also would provide additional 10% for the tax credit for each decade of a homeowner’s life, beginning at age 60, and increase the tax credit for elderly and disabled homeowners.
The measure also seeks to provide local governments alternate funding streams to offset the loss of property tax revenue, allowing cities and counties to seek voter approval to raise the local option sales tax and adding an inflation index to the state’s gas tax.
Grassley said House Republicans are still discussing the possibility of changing Iowa’s gas tax, but said “the reason I didn’t include it at this point because I don’t know if we have resolution” within the caucus. But there are other parts of the Senate proposal — like making changes to tax multi-residential and other properties at a different rate than property where the owner lives — that he said caused concerns for his caucus.
While House Republicans have called for a “simple” and understandable solution, Dawson has repeatedly called for the Legislature to make major changes to Iowa’s property tax system.
“No more Band-Aids, no more simple approaches,” Dawson said during an Iowa Press interview. “Either we go after the system head on, or we be honest with ourselves and say that we fell short.”
In a statement Thursday, Dawson said the Senate passing a bill “overhauling Iowa’s property tax system” with bipartisan support shows that there is “obvious momentum behind our vision for property tax relief.”
“We look forward to seeing a bill pass the Iowa House and continuing discussions on how we can provide real relief to Iowans this legislative session,” Dawson said.
Whether there is enough support from the House and governor to “overhaul” the system remains to be seen. Gov. Kim Reynolds told reporters in a news conference Thursday the House proposal was moving forward discussions on areas where the state can find property tax cost savings, while saying the measure “simplifies what we’ve been doing”
“There’s a lot more that done,” Reynolds said. “But I think before you can start to overhaul a system, you have to simplify it as much as you can.”
