With the Idaho Legislature meeting in Boise, one issue that is drawing considerable focus is property taxes. Both Republican and Democrats say they are hearing from their constituents that property taxes need to be reduced.
A key driver is rapidly increasing home values in Idaho’s major urban areas, most particular in the Coeur d’Alene, Treasure Valley and Idaho Falls areas. As a consequence, the homeowner exemption property tax break (which shields up to $100,000 of an owner’s value from property tax levies) has been diluted and many people are seeing higher tax bills.
In the last four weeks, four bills on the topic were introduced in the House by Republican lawmakers —- with radically different approaches.
House Majority Leader Mike Moyle (R-Star) introduced two measures. HB353 would cap property tax increases at 3% next year statewide. That would allow a maximum growth next year of $71 million, eliminating new revenue to local governments for new construction.
His companion measure, in the alternative, is HB 355, which would eliminate any increase for local governments next year, saving potentially up to $132 million.
Moyle says either measure “puts a Band-Aid on this and it gives those of us in the Legislature time to find a way to proceed with this”, meaning property taxes. He sees these as measures to provide taxpayers breathing space while the Legislature sorts through options.
Both bills are likely to be hotly opposed by fast growing counties and cities who will point out that the measures will strip them of the revenue necessary to deal with the influx of residents they are facing.
Rep. Steven Harris (R-Meridian) rolled out HB 354 which takes a different tact. He would require local governments that don’t increase property taxes by the maximum 3% allowed to pass a resolution “reserving” the potential to increase the tax in the future. If not, the opportunity would be foregone without a public vote. Arguably, such a local resolution would make clear that a local government unit intends to potentially take the increase in the future, likely diminishing the reservation of that right in the first place.
More radical is HB 359, which would repeal the property tax itself statewide. Introduced by Rep. Jason Monks (R-Nampa), the measure would eliminate property taxes and offset them by raising the sales tax to 11% and directing the additional revenue to local governments. It is a sweeping measure and really asks Idahoans if they are willing to eliminate the hated property tax by roughly doubling sales taxes on vehicles, retail goods, food (currently) and more.
Sen. Jim Rice (R-Caldwell) also has a proposal to raise the sales tax from 6% to 7% and then channel the difference to local school districts. It would impact property taxes by eliminating supplemental property levies used to boost school budgets, reducing the property tax piece by over $200 million. Rice would like to put the measure on this year’s ballot for approval.
Democrats are also pushing the idea of raising the homeowner exemption above $100,000 and indexing it to future changes in Idaho home prices. That would reduce the share of property taxes paid by homeowners but would shift more of the tax burden to owners of second homes and commercial properties. That shift was the basis of establishing the $100,000 cap.
Another approach being tossed around is boosting Idaho’s “circuit breaker” tax break. Some of the hardest hit by increasing property taxes are those on fixed incomes. The circuit breaker allows a reduction of property taxes of up to $1,320 a year. It requires an annual application to the local county and the applicant must have earned less than $31,280 in 2019 and be over 65, a widow or widower, disabled, a veteran, or a former POW.
The idea would be to shield this population further by some combination of 1) increasing the income cap or, 2) increasing the property tax reduction itself for those who qualify. The advantage of this approach is that it would directly target those hit hardest by higher property taxes.
Expect more ideas to surface shortly and property taxes to be an issue throughout the session and into the primary and general elections.