New proposal aims to push Iowa lawmakers closer to property tax deal
Calling it an “extremely reasonable compromise” that he said takes elements from all three Republican-led plans presented so far, Iowa House Speaker Pat Grassley on Thursday unveiled House Republicans’ latest proposal to address ways to lower Iowa homeowners’ property taxes.
The plan would cap local governments’ annual property tax revenue growth at 2 percent and convert a current homeowners’ homestead credit to an exemption that would be tripled to $15,000, among many other provisions.
Speaking Thursday at the Iowa Capitol, Grassley said the latest proposal from House Republicans is an attempt to get closer to a compromise on property tax legislation with their fellow majority Republicans in the Iowa Senate and Republican Gov. Kim Reynolds.
Many Statehouse Republicans have said addressing property taxes is the top issue facing the Iowa Legislature during the 2026 session, which is entering its waning stage. The expiration of lawmakers’ per diems — designed to encourage legislators to have their work done — is Tuesday.
Iowa ranks among the highest-property-taxed states in the nation, with the ninth-highest property tax burden in the country, according to the Tax Foundation, and the 10th-highest effective property tax rate, according to Rocket Mortgage.
Legislative Republicans have introduced, amended and advanced their proposals throughout this year’s session. Senate Republicans passed their version, Senate File 2472, last week with bipartisan support in a 41-4 vote.
The revenue cap is one of the few elements on which all three parties agree. House Republicans’ latest proposal, an amendment to their House File 2475, in addition to the cap and $15,000 exemption would use $175 million in state funds from the homestead credit to buy down the $5.40 property tax levy for local school funding, require 25 percent of school infrastructure funding by the 2031 state budget year to go toward property tax relief, cap local government reserve balances at 35 percent while allowing funds above that level to be saved for infrastructure, and cap the duration of future tax increment financing districts at 20 years.
“This is a serious step forward in the right direction, and this is something that should be taken very seriously as a potential compromise,” Grassley said. “From the House’s perspective, we’ve incorporated several pieces that both the Senate and the governor wanted to have.
“We feel that there needs to be movement toward finding a compromise. We continue to say to Iowans that we’re going to accomplish that. And from the beginning of this, we knew that there would have to be movement. We feel by incorporating many of these changes that we’ve made a good-faith effort, and it puts us in a position where I don’t see how this does not bring us closer to an agreement. And I’d be disappointed if it didn’t.”
Grassley said the school infrastructure and TIF limitations are among the examples of House Republicans including in their latest proposal elements preferred by the Senate or Reynolds.
“This is a tremendous move forward toward incorporating many facets of other bills,” Grassley said. “In fact, I would even argue there was only a few pieces that we took from our original bill. Most of this is incorporated from the Senate and the governor’s plan, to try to find that level of compromise.”
Unlike the Senate’s plan, the latest House bill does not end the state’s decades-old rollback system or create an exemption specifically for seniors. Grassley said House Republicans chose a policy that they say will benefit all homeowners, allow local governments to increase their local-option sales tax and index the state’s gas tax to inflation.
When the Iowa Senate debated and passed its bill, state Sen. Dan Dawson, R-Council Bluffs, also called that proposal a “good-faith effort” to close the gaps in the three proposals.
“Last week, we passed the Senate Republican proposal on overhauling Iowa’s property tax system with a vote of 41-4. There is obvious momentum behind our vision for property tax relief,” Dawson said Thursday in a statement to The Gazette. “We look forward to seeing a bill pass the Iowa House and continuing discussions on how we can provide real relief to Iowans this legislative session.”
Speaking at her own news conference later Thursday, Reynolds called the latest House proposal “a great development” that creates “great momentum.”
Reynolds said she believes the new proposal gives Republicans one bill they all can now work off as they attempt to reach an agreement that can pass both chambers and that Reynolds will be willing to sign into law.
“Everybody has their bills. And so what (House Republicans) have made an attempt to do is to take a look at the Senate and the governor and their bill, and try to put where they saw some similarities — ‘Here’s from mine, here’s from the Senate, here’s from the House’ — put them in one bill so that we can start operating off of that,” Reynolds said. “So now we sit down again.”
House Republicans have advanced their bill through the chamber’s Ways and Means Committee on tax policy, but have not yet debated the bill on the floor.
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