Governor Kim Reynolds says she gonna meet with Iowans over the next few months and develop a property tax reform plan that could include changes in other taxes. In 2023, Reynolds signed a bill into that capped some property tax levies and created new property tax exemptions for veterans and Iowans over the age of 64 who own a home. During an appearance today on Iowa Press on Iowa PBS, Reynolds indicated it’s time to go much farther.
“I do need to focus on property taxes,” Reynolds said. “That is what we hear about all the time and I was hopeful that the legislature — they had kind of asked to take the lead on that this year, so we let them. I worked on other things.” Reynolds has until June 14 to sign or veto the bills passed by the 2025 legislature, then she plans to spend the rest of the year working on property tax reform. “I am gonna be out in the state and I am gonna be talking to Iowans and stakeholders and laying out what it looks like,” Reynolds said.
“I mean we have to think differently about how we deliver services to our citizens. We can’t continue to have the level of government that we have and expect the property taxes to go lower. It’s just not feasible. The math doesn’t work.” Only eight other states have more counties than Iowa and according to the U.S. Census Bureau, Iowa has more than 1800 local units of government, including cities, counties, school districts, and townships. Reynolds did not suggest mergers or consolidations today, but she did say every option that would lower property taxes should be considered.
“We have to figure out how that system, how we holistically look at the package moving forward and that just, you know, is disruptive…That means people will be a little uncomfortable, but we’ll have the conversation,” Reynolds said. “…Forty percent of property taxes is education, so we have a school funding formula that is crazy. It’s so complicated.” One of the main elements of a property tax reform plan key Republican legislators developed over the past two years calls for sending another $400 million in state tax dollars to public school districts, to replace local property taxes. Reynolds seems reluctant to do that.
“It’s still taxpayer dollars,” Reynolds said. “I always say it’s local, federal, state — it’s all coming out of the taxpayer’s pocket.” And the governor said it’s too soon to say a firm limit on how much city and county budgets may grow should be part of the final plan. Reynolds hinted an even broader tax discussion could be ahead. “Tax credits, should we maybe reduce some those and plug that into property tax savings or into individual income tax savings?” Reynolds asked rhetorically during the program.
“Sales tax, what do we do with that?” In early 2020, Reynolds unveiled what she called the “Invest in Iowa Act” that would have raised the state sales tax a penny and used that extra revenue to lower property taxes, cut the income tax and invest in water quality and outdoor recreation projects. She shelved the plan once the pandemic hit. Since then, Reynolds has signed a series of tax cuts that have eliminated the tax on retirement income and cut the individual income tax rate to 3.8%.
Reynolds, who announced last month she wouldn’t seek reelection, now indicates her goal of completely eliminating the state income tax by the time she leaves office would be “aggressive” and she will engage in a property tax reform debate instead. “I want to create a foundation that when I do leave, the next Republican governor that sits in that chair will be able to continue to reduce the individual income tax rate,” Reynolds said.
