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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
  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
  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
   Here is the effect of this tax-
shifting plan upon different types
of property owners.
   1.  The  owner  of  a modest


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