Amendment is a bad tax idea

Last week I wrote how a proposed Iowa constitutional amendment making it harder to raise income taxes would actually be bad for Iowa taxpayers. It would shift the burden to property taxes, which are already too high in Iowa.

We have friends and family who live in Indiana. Although it has a higher population than Iowa, the two states are similar in many respects, especially in agriculture. There are a lot of Hoosier farmers.

There is one big difference between these two Midwestern states — property taxes. Hoosiers pay about half as much in property taxes as Iowans for the same value house.

I’ve written before about California’s property tax system, which seems much fairer. The value of a house is set when it is sold, and taxes on it remain essentially the same as long as it remains under the same ownership.

Because of Proposition 13, added to the California Constitution in 1978, property taxes are frozen at their 1976 levels, subject to no more than a 2% increase per year. Valuations of a property aren’t adjusted until the property is sold. I talked to a man who bought a house for $200,000 in 1988, and it’s worth $2 million today, but his taxes are less than a $150,000 home in Storm Lake because they are frozen at 1988’s valuation. As long as he stays in his home, he is protected from higher taxes, which is great for people living on a fixed income in an area that is rising in property values, such as San Francisco.

Iowa and other states periodically reappraise property, which can be devastating for people on fixed incomes who are priced out of their homes by ever-rising taxes.

Last year all property in Buena Vista County was reappraised and the result for one retired Storm Lake couple was taxes on their home here doubled.

They not only left Storm Lake, but fled Iowa altogether.

As I wrote last week, taxes on our 90-year-old Storm Lake home, where we have lived for 40 years, have risen 50% over the past five years. Property taxes on our modest Times Square office doubled in that time.

If you are trying to run people out of Iowa, this is a great way to do it.

Real estate doesn’t make a person any money until it is sold. Compare your home to stocks you buy when you are young. You’re not taxed on the increasing value of those stocks until you sell them, oftentimes decades later, when you are retired and in a lower tax bracket. You are not taxed just for owning the stock, only on any dividends they may pay out.

Property taxes don’t work that way. They gouge you despite the fact that your house doesn’t make any money for you, it just costs to maintain it. Yet it’s taxed as though it’s producing revenue for you.

By eliminating income taxes, as our state has done over the past few years, we are forcing property taxes ever higher.

Likewise, if this constitutional amendment passes, sales taxes will increase as well. Think cars are expensive now? Wait until higher sales taxes add 10% to the price.

The proposed Constitutional Amendment One will accelerate the demise of Iowa’s economy, which already has a bad cough. I’m voting NO on Amendment One while I can still afford to live in my house.