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Senate Defeats 3-Year Residency Requirement Critics Warned Loss Of Tax Break Would Kill Growth, Cost Jobs

The Senate rejected again on Monday legislation intended to make newcomers pay for the costs associated with Idaho’s dramatic population growth.

On a 20-13 vote, the Senate defeated a three-year state residency requirement before homeowners could benefit from the so-called homeowners property tax exemption.

As they did a year ago, when the same proposition was defeated on a 19-16 vote, critics warned that loss of the property-tax break would kill growth, costing the state new jobs essential to further economic expansion.

They also objected to denial of the exemption to Idahoans who chose to leave the state before ever owning a home. Only those who have had the tax break before could leave the state and return still eligible for it without the waiting period.

But supporters, led by Republican Stan Hawkins of Ucon, maintained the residency requirement was the simplest way to make those creating the problems accompanying growth pay for them.

“I’m surprised by all this concern for people who may move in,” Hawkins said. “We ought to be concerned about the people who are already here because they’re the ones who are being impacted.”

Under the homeowners property tax exemption, half the assessed value of a home is shielded from taxation up to $50,000. The average tax savings statewide is about $850 a year. But in areas with the highest property tax levies, the savings could be nearly twice that.

The eligibility requirement could deny the tax break to tens of thousands of people annually, based on statistics for people changing vehicle registrations each year.

The residency requirement for the exemption has been an alternative to socalled impact fees, which critics claim are complicated to administer and actually force home values higher.

But fee advocates contend that at least cash raised from those fees is earmarked for addressing growth problems. They point out there would be no restrictions on the ways local governments could use any windfall from the denial of the homeowners exemption.

They also said the new property tax reduction package includes a 3 percent cap on annual budget increases for local governments other than school districts, so that they could not gain any additional cash from denial of the homeowners exemption to newcomers.

Hawkins and his supporters, however, maintained that even under those circumstances, their plan reduces the tax burden on longtime residents by shifting it to newcomers.