by Robert Willis
Retired Des Moines horticulturist Robert Willis on
December 14, 2004, submitted a Tax Reform Proposal to
Iowa's Property Tax Implementation Committee. Bob Willis
was, with Damon Gross of Waterloo, IA, the cohost of the
Council of Georgist Organizations conference held in Des
Moines in September, 2000. At that conference, Dr. William
Batt, Central Research Group, Albany, NY, presented a
detailed "Iowa Tax Shift Plan: Shifting from Conventional
Property Taxation to Land Value Tax." Bill Batt was
assisted by Bob Jene, Chicago, in analyzing statistics,
facts, graphics, and GIS simulation from the Polk County,
IA assessor's office. (See Sept.-Oct. 2000 GroundSwell)
The 2004 Iowa Legislature General Assembly charged
the Property Taxation Review Committee that it shall
"review and analyze the following: a. Revenue Sources
available to local governments, including taxes, payments
in lieu of property taxes, fees, state appropriations, and
federal moneys; b. The portion of state revenues annually
appropriated, or otherwise disbursed, to local governments;
c. Exemptions, credits, deductions, exclusions, and other
reductions in local taxes, authorized by state statute or
local ordinance, to local taxpayers and state reimbursement
of any property tax credits and exemptions; d. Services
provided by local governments, including those provided at
the discretion of a local government and those mandated by
federal or state statutes and regulations; e. The role of
property taxes in funding local government services and the
types of services currently funded by property taxes; f.
Alternative systems of property taxation, alternative
procedures for protesting property assessments, and various
methods of controlling property tax revenues and
expenditures. In conducting its review and anlysis, the
committee shall study local taxes from the standpoint of
neutrality; competitiveness; simplicity; stability; and
equity, including maintenance of equity among classes of
taxpayers and among taxpayers within the same class. The
committee may hold public hearings to allow persons and
organizations to be heard."
The committee, cochaired by Iowa Senators Bryan
Sievers and Rep. Jim Kurtenbach, consists of two additional
senators and two additional representatives plus 12 public
members.
Bob Willis' Proposal, as follows, was submitted
December 14, 2004, and is posted to the committee's web site,
http://www.legis.state.ia.us/committees/interincommittees/P
ropertyTaxImplementationCommittee/.
TAX REFORM FOR ECONOMIC DEVELOPMENT
The Property Taxation Review Committee has stated
very reasonable and clear objectives for a property tax
system for the state of Iowa.
I submit that the following 'Tax Shift Proposal'
will best satisfy those objectives:
- Cap structure assessments at Jan.1, 2004 rolls
- Annually reassess/tax non-exempt land at 100%
value apart from capital values
- Replace one-fifth of sales tax with state
property levy
- Replace city minimum user-charges with city
property levies
Basing taxes on market values of land as
established by our free market system will be more
reliable, equitable, simple, and responsive to changes in
valuation and classification than any known choice of tax
base. The market, not legislatures, city councils or
county supervisors will set land values for Iowa's
assessors. The only help the market needs is less of
deadweight taxes on structures, purchases and incomes.
In researching the effect of tax shift proposals I
have made extensive use of the Polk County assessor's
website for assessment data by jurisdiction and also
reports from the Iowa Department of Revenue site. The
opportunity to access similar data for most counties in
Iowa is open to all.
This plan will effectively support economic
"growth" in all of Iowa's 950 incorporated cities or better
yet "economic development" as defined by Dr. Pogue in
"Criteria for Good Proposals". Each city regardless of
population and land area is a potential commercial center
and therefore extremely important to both rural and urban
residents, the farm sector and commerce. The Tax Shift
Proposal is designed to enhance the economy of every city
and county in Iowa.
With hope for Iowa's Future
TAX REFORM FOR ECONOMIC DEVELOPMENT
* Tax relief for families and businesses
* Prod owners of under-utilized land to build
housing, create businesses
* Provide funds for education, public protection, public infrastructure
Economics of taxation:
Although the share of Wealth to each production
factor is Rent to land, Wages to labor and Interest to
capital, mere ownership of land does not produce Wealth.
Rent charged for use of land is a 'taking' of Wealth earned
in common by labor and capital. State and local taxes on
incomes, purchases and capital goods are also a "taking of
Wealth" from labor and capital. Labor and capital can flee
when taxed but land stays put. Iowa can encourage economic
development and cut taxes on families and business by
taxing land, a public revenue source as durable and
predictable as Earth and Time.
TAX SHIFT PROPOSAL
Shift from taxes on wages and interest to taxes on 100%
value of land
* Cap each parcel's structure assessment at Jan.1,
2004 rolls
* Annually re-assess and tax all classes of
non-agricultural land at 100% value (2005)
* Replace one-fifth or more of state sales tax with
state property levy (2005)
* Permit cities to replace city minimum
user-charges with property levies (2005)
Capping structure assessments
Exempts all new construction from property tax
Shifts tax assessment from land and structures to
land as the primary value
Protects existing structures from taxes on increase
in assessments
Annual revaluation/taxation of non-exempt land at 100%
potential value
Taxes billions in unrealized and on-going
appreciation of land values
Establishes uniform assessment and taxation of all
classes of land
Taxing land at 100% ends rollback on land, shifts
rollback to structure values
Property levies replace state and local sales tax and
user-charges
Tax on land capitalizes to lower prices for land
Consumer tax cuts raise present value of land
Lower land prices and tax cuts for consumers spur
economic development
Landowners not land buyers pay added tax on land
Current owners cannot avoid higher tax by moving
land to a lower tax jurisdiction
Idle lots produce no goods; have no consumers,
generate no cash rent to pay tax
Buyers capitalize tax to lower price for land, pay
land tax not interest on mortgage
Economic development for Iowa's cities and towns
High taxes on high value urban lots drive down land
prices
No taxes on new construction encourage owners to
improve idle properties
Builders pay wages, buy materials to produce
housing, stores and factories
Spend more public revenues on education
Spend less on development projects; rely on tax
reform to drive growth
Spend less on aid to families by creating job and
housing opportunities
Spend less to service new lands by making better
use of existing urban infrastructure
New opportunities for family farmers
Rising tax, falling land prices, will encourage
landlords to sell some of their land
Lower cost land and lower taxes on structures aid
adding value to farm products
Economic development creates new local markets for
value-added products
Rural economic development
Farm product manufacturers, processors and
retailers improve sites tax free
Railroads and utilities upgrade services and
structures tax free
Thriving cities and towns add to quality of rural living
SATISFY OBJECTIVES OF A TAX SYSTEM
Reliable and predictable
Land is a reliable and predictable public revenue tax base
unaffected by level of taxation. It appreciates in value from
investment of public revenues in infrastructure, schools and public
protection or from rising individual and private sector vitality
and general welfare. No amount of tax can remove land from the
face of the Earth. Structures as a tax base are depreciable
capital renewable only if freed of taxes.
Equitable
Land taxes are equitable. Unlike taxation of economically
needed physical capital which depends on constant human effort to
build, maintain and renew taxing the market value of limited land
resources legally platted and claimed for exclusive use by one
owner does not burden human effort.
Based on economic (market) value
Taxation based on economic value requires assessing and
taxing all classes of non-exempt land including utility and
railroad lands exclusive of capital values at 100% market value.
Land sales driven by reward of 100% exemption for new construction
will set realistic market values. Capped values of structures will
roll down when properly assessed at total parcel value less
the higher land assessment.
Simple and transparent to the taxpayer
What can be more simple and transparent than a
single value of land for each parcel, rollbacks phased out,
and one consolidated rate to replace current property tax,
city minimum water bills, and a portion of Iowa sales tax.
Elimination of intrusive assessment of structures and free
distribution of cadastral maps of uniformly assessed land
values will build public confidence in the system.
Responsive to changes in valuation and classification
Uniform assessment of non-exempt land at market
value will raise city tax bases without raising total
taxable values for most parcels. For instance, Ankeny's $2
billion 100% 2004 combined land and structure values of its
13,369 parcels, 5,212 total acres, could rise by 20% or
more with no increase for 10,918 of its parcels. Des
Moines Highland/Oak Park neighborhood's $459 million 100%
values of 6,070 parcels, 1,166 acres, could rise by 5% with
no increase for 5,571 parcels and Des Moines' downtown
square mile $814 million 100% values could rise by 8.4%
with no increase for 172 of its 342 commercial and
industrial class parcels. (see charts of current per acre
values vs per acre revaluations)
Foster economic development
Raising the tax on land to replace current user
charges, property taxes and sales taxes will prod owners of
tens of thousands of currently low use urban lots into
selling or developing their parcels for homes and
production of goods. With less to pay in taxes and user
charges families and business will have more to spend on
goods. Lower prices for land for development, lower taxes
on families and business, affordable goods including
housing and reliable public services including schools are
effective incentives for growth in all of Iowa's 950
incorporated cities.
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Robert Willis may be emailed at rpwtxbustr@aol.com