After a late-afternoon debate, the Senate has voted 23-11 in favor of HB 431, the bill to remove the indexing from the homeowner’s exemption from property taxes, instead just fixing the exemption at a maximum of $100,000; that will mean a tax increase after next year for homeowners whose homes are valued at more than $200,000, as values rise. The House-passed bill now goes to Gov. Butch Otter.

Senate Tax Chairman Jeff Siddoway, R-Terreton, said, “This bill could’ve been better, it could’ve been a lot better. We could’ve taken this exemption completely off.”

The exemption doesn’t change the total amount of taxes collected; if the homeowner’s exemption goes up, all other types of property taxpayers in the district pay a little more to make up the difference; if it goes down, they pay a little less.

Sen. Jim Guthrie, R-McCammon, said, “Every time the exemption changes, it causes a tax shift. … If the market moves in Idaho one way or the other, there’s no law that says we can’t revisit this and move that $100,000.” He said HB 431 is “offering policy that is sensible, stable and fair.”

In 2015, owner-occupied residential property, which qualifies for the homeowner’s exemption, paid 44.9 percent of all property taxes in the state, according to the state Tax Commission. Commercial property was the next-highest, at 28.6 percent. Non-owner occupied residential property made up 19 percent. And all other categories, including agricultural, utility, mining and timber, were at low single-digit percentages.

Asked to analyze the bill, Alan Dornfest, property tax division chief for the Tax Commission, testified at an earlier committee hearing that if the bill is passed, in 2018, about $10 million in property taxes would shift to owner-occupied homes, a 2.2 percent increase. “High-value homes will pay more, and other property types will pay less,” Dornfest said.

The homeowner’s exemption was capped at $50,000 or 50 percent of the value of the home – whichever is less – from the time it was enacted by voter initiative in 1983 until 2006. Since the indexing was imposed in 2006, Idaho’s maximum exemption first rose, then fell during the recession as housing prices fell; it’s now rising again and currently is at a maximum of $94,745, and next year it’s expected to exceed $100,000.

Sen. Shawn Keough, R-Sandpoint, recalled co-chairing an interim committee that held hearings around the state in 2006. “Many of us were hearing very loudly from homeowners about being taxed out of their homes,” she said. The hearings “were quite boisterous, and the message was very clear, that we needed a change.” She noted, “The homeowner’s exemption did not get any significant look … from 1983 to 2005.”

Keough asked, “Is it going to be another 20 or 30 years before we or our successors have this discussion again? Could we put a sunset on it? How did we get that $100,000? Why not $125,000 if we’re going to walk away from it? History shows us that we’ll walk away from it for 20 years. … I hope that we will call upon future senators to pay attention, and not walk away from this for 20 years.”

Sen. Grant Burgoyne, D-Boise, told the Senate, “The fact is that the Legislature has a history of not responding to the residential property taxpayers’ complaints about their taxes, and by the time the pressure builds up enough that the Legislature has to respond, we have a history of getting some rather poor public policy. The indexing I think was a wise decision.”

Sen. Dan Johnson, R-Lewiston, said the bill involves a tax shift, just as the exemption does – it’s just who the tax shifts from and to. “I have visited with my county officials and received their input, and they do not support this,” he said.

Sen. Dean Mortimer, R-Idaho Falls, said he sees the issue from the perspective of business property owners. “This homeowner’s exemption is a tax shift,” he said. “In my opinion it is very unfair, but it is the law. It is taxation without representation.” He said business owners don’t get to vote like homeowners. “I don’t get another vote for every business property that I own, so I really only have one vote when in fact I’m paying on multiple properties,” he said. “From a business owner standpoint … I as a business owner feel that we need the stability, and the homeowner’s exemption is definitely a shift to the business owner.”

Sen. Mary Souza, R-Coeur d’Alene, said, “I’ve been receiving emails from our county assessor, who says that as a county, our median home price is already over $200,000 and this would cause a problem for the homeowners in our area. Both the Post Falls and Coeur d’Alene chambers have expressed that they do not like this bill.”

The measure now moves to Gov. Butch Otter’s desk. Here’s how the Senate vote broke down:

Voting in favor: Sens. Bair, Bayer, Brackett, Davis, DenHartog, Guthrie, Hagedorn, Harris, Heider, Hill, Lakey, Lee, Lodge, Martin, McKenzie, Mortimer, Nuxoll, Patrick, Rice, Siddoway, Thayn, Vick and Winder.

Voting against: Sens. Buckner-Webb, Burgoyne, Johnson, Jordan, Keough, Lacey, Nonini, Schmidt, Souza, Stennett and Ward-Engelking.

Absent: Sen. Anthon

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