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28 Nat'l Mun. Rev. 200 (1939)
Iowa Tries Homestead Tax Exemption

handle is hein.journals/natmnr28 and id is 236 raw text is: Iowa Tries Homestead Tax Exemption By C. A. CROSSER Secretary, Des Moines Bureau of Municipal Research Tax credit law proves popu- lar with those who benefit under it, but many find ad- dition of sales and income taxes burdensome. AKE away from John Homeowner the sales and state income taxes he pays, and then give back part of them, all of them, or even more than he paid, as a discount on the real estate tax on his home, and you have in substance the operation of the Iowa homestead tax credit law. To express it in another way: about $11,000,000 out of the sales and income taxes paid by about 900,000 gainfully-employed per- sons in the state of Iowa is given to all taxing bodies to make up the loss they sustain by discount- ing an equal $11,000,000 from the real estate taxes of 300,000 home- stead owners.. In other words, taxes collected from 900,000 per- sons are distributed among 300,- 000 persons. Here is the way this law oper- ates. Twenty-five mills is de- ducted from the tax bill of every bona fide homestead owner in Iowa on the first $2,500 of his assessed valuation. Thus a Des Moines home owner who paid a 54-mill tax in 1938 received a 25-mni deduction, which cut his tax rate to 29 mills on the first $2,500 assessed value of his prop- erty. The farmer receives this same homestead tax credit up to $2,500 assessed value on the so- called home-forty acres in- cluding the farm buildings. In taxing districts which have less than 25 mills, and there are many of them, the homestead owners receive tax credit for the full millage levy and therefore will pay no property tax at all if their assessed values are less than $2,500. The city, county, school, and state taxing districts are content with this arrangement because they are reimbursed for the loss of this discount to homestead owners by receiving an equal amount from the state out of the sales and income tax funds. This law has turned out to be one of the most effective means of substantially relieving the real estate tax of homestead owners which has been devised in any state. At the same time, it re- sulted in a complete double- crossing which the Iowa legisla- ture gave non-homestead real estate owners. This is because the sales and income taxes, which were authorized in 1934 by the Iowa legislature, with the promise in the title of the bill that they would replace in part the tax on real estate, were diverted in 1937 to replace only the tax on homesteads. It was a case of a fine objective reached by a devious means. Here is the effect of this tax- shifting plan upon different types of property owners. 1. The owner of a modest 200

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