O-SenseIdahoans love to gripe about property taxes.
This year’s Legislature may be about to shake property taxes up a bit. The basis is a proposed change in Idaho’s homeowner’s exemption.
One of the big benefits of owning a home in Idaho is that half of the value of your home, if it is your primary residence, is exempt from property taxes up to a cap.
The cap is the issue. Beginning in 1983, the Idaho Legislature set the cap at $50,000. It remained at that level 22 years until 2005. In 2006, the cap was raised to $75,000.
The impact of the homeowner’s exemption of up to half the value and the interacting cap is best illustrated by example. In 2006, if your primary home was worth $150,000 with the cap of $75,000, then half of the value of your home of $75,000 was exempt from property taxes. Another way of putting it is that your property taxes were computed as if your home is only worth $75,000. But, if your home had been worth $250,000, then you would pay taxes as if it were worth $175,000. If you instead had a rental home worth $100,000 or an office building worth $350,000, on those you would pay property taxes on the full value.
In 2007, the Legislature started allowing the cap to be adjusted each year based upon federal housing data purporting to show the increase or decrease in housing prices in Idaho. The index today is generated by the Federal Housing Finance Agency and it looks at changes in the resale price of a broad array of Idaho properties over time. For instance, if a particular Idaho property five years ago sold for $100,000 and today sold for $150,000 that would indicate that the resale price has jumped 50% over the five-year period for that particular property. The index reflects the aggregate change in Idaho of a wide group of properties.
Since 2006, the cap on the homeowner’s exemption in Idaho has varied quite a bit because of the annual indexing of the homeowner’s exemption and fluctuations in home prices:
| Year | Homeowner’s Exemption Cap |
| 2006 | $75,000 |
| 2007 | $89,325 |
| 2008 | $100,938 |
| 2009 | $104,471 |
| 2010 | $101,153 |
| 2011 | $92,040 |
| 2012 | $83,974 |
| 2013 | $81,000 |
| 2014 | $83,920 |
| 2015 | $89,580 |
| 2016 | $94,745 |
Source: Idaho Tax Commission
The bill in question this year is HB431. Sponsored by Rep. Janet Trujillo, R-Idaho Falls, it would set the cap at a fixed dollar amount of $100,000. The measure has passed the House Revenue and Taxation Committee and is on the way to the House floor.
The bill is backed by the Idaho Association of REALTORS (“IAR”). John Eaton, the government affairs director for IAR, points out that the impact of the indexed cap has been to shift an increasing share of the property tax burden to other property holders, in particular other forms of residential property – rental properties and second homes --- but also onto commercial properties and ones with agricultural uses.
He shared with me the following chart showing the annual property tax shift over time:
| Year | Shift of Property Tax Burden from Residential Homeowners to Other Property Owners |
| 2006 | $120.3 million |
| 2007 | $136.4 million |
| 2008 | $156.1 million |
| 2009 | $179.5 million |
| 2010 | $171.4 million |
| 2011 | $169.9 million |
| 2012 | $153.0 million |
| 2013 | $160.4 million |
| 2014 | $162.6 million |
| 2015 | $168.3 million |
Source: Associated Taxpayers of Idaho
Thus, since the increase in the cap to $75,000 in 2006, the property tax shift has ranged from $120.3 million a year to $168.3 million last year.
Eaton suggests that “[t[he Legislature should vote if they want to take such action, not put it on autopilot.” He argues it is better tax policy for the Legislature to make a conscious decision to set the homeowner’s exemption at a particular level, understanding the actual impact of the number at a specific point in time on particular taxpayers.
He also says that the floating exemption can cut against homeowners when values fall, as they did a few years ago.
According to blog post by The Spokesman-Review’s Betsy Russell, the move is opposed by some of Idaho’s elected county assessors. She quotes Ada County Assessor and President of the Idaho Association of Counties Bob McQuade as saying: “It will ultimately be a tax shift to the homeowners, as the value erodes.”
I presume Mr. McQuade is looking at the housing data in Ada County. According to the Ada County Association of REALTORS, in 2015 the median home sold in Ada County went for $229,000, compared to $210,000 in 2014.
Under HB 431, the median home in Ada County, after applying the $100,000 cap, would find $129,000 in value subject to property taxes. But, under the current indexed system, if the cap rose hypothetically to $110,000, only $119,000 in value would be taxed.
The current approach of indexing the cap each year benefits high cost areas like Ada County because the cap can move up as overall statewide values move up. A fixed cap of $100,000 could reduce the value of the cap in an appreciating market.
A real issue for Idaho legislators is where do they think home values will go in the next few years? If they think they are heading up, the impact of setting the cap at $100,000 will be to reduce the amount homeowners are shielded from the property tax unless the Legislature revisits the issue regularly. IAR’s John Eaton thinks that is exactly the right approach to take.
Another point is that indexing doesn’t have the same impact in Idaho counties where home prices are considerably lower than the high-price counties. For instance, Canyon County, Twin Falls County, Bannock County and Bonneville County all have average prices such that their average homeowner’s value is below twice the current cap, thus fewer homes are being “capped-out”. In most if not all of these counties, the median price is even lower. In Idaho’s more rural counties, the average home value and median values tend to be even lower. These counties (and their representatives in the Legislature) have even less incentive to boost the cap in the first place.
The debate over HB 431 is worth paying attention to because of the widespread impact on many Idaho property owners, both residential homeowners and other property owners, of both implementing a $100,000 cap or maintaining the current system of an indexed, moving cap.
Steve Taggart is an Idaho Falls attorney specializing in bankruptcy (www.MaynesTaggart.com). He has an extensive background in politics and public policy. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. .
