Is a Four Percent Raise Enough?

Would a four percent increase in income next year help your household budget? For most families it would.

Four percent isn’t enough for the city of North Liberty according to their city administrator and they want to increase the property tax rate another 1.2 percent. In recent years the city’s taxable valuation growth has increased between seven and 14 percent annually, but this year is was “only four percent.”

Each year, the cost of providing services to residents will increase due to inflation and population growth. North Liberty’s population grew 1.6 percent in 2017 and inflation was 1.9 percent in 2018. A reasonable budget increase of 3.5 percent would cover that growth. Especially after their budget rode a wave of increasing revenue of up to 14 percent in recent years.

Each city, county, and school district are unique, but this example from North Liberty is why Iowans are frustrated with ever increasing property taxes and highlights the need for reform. The best policy solution would ensure Iowans receive relief from property taxes is for the state legislature to enact a property tax revenue limitation.

A property tax revenue limitation could limit revenue growth to 2 percent per year, and if the city or county wants to spend additional tax dollars beyond the limit, the local government in question would have to take a vote to override the limitation. This would slow the growth rate in spending.

A final protection for Iowa taxpayers would be for local governments to justify why they need to increase taxes and spend more taxpayer dollars. Utah has the best model of this called Truth in Taxation. It requires an extensive public notification process when a local government wants to raise taxes.

Under the Truth in Taxation process a city, such as North Liberty, would have to demonstrate to taxpayers why additional revenue is needed. This allows a conversation to take place between local government and taxpayers.

A property tax revenue limit combined with Truth in Taxation would empower Iowa taxpayers and create a more transparent relationship between taxpayers and their local governments.