One Percent Initiative Plan Cuts Property Taxes But Foes Say Other Taxes Would Then Have To Rise

The One Percent Initiative would cut property taxes, but it also would require the state to come up with a way to replace property taxes that now fund schools.

Ron Rankin, the initiative’s author, said the Legislature doesn’t have to raise other taxes. He contends Idaho can absorb the cuts.

Business and legislative leaders disagree.

“He’s just simply wrong,” said House Speaker Mike Simpson.

Idaho officials like to describe the state’s tax system as a three-legged stool, with each type of tax as a leg. The idea is that by balancing taxes between the three major sources, Idaho keeps its tax system stable.

The One Percent Initiative would force a rethinking of the whole system, by shortening one of the stool’s legs.

“We just can’t make the property taxes better by making the sales and income taxes worse,” said Steve Ahrens, president of the Idaho Association of Commerce and Industry.

Laird Maxwell, head of Idahoans for Tax Reform and a lieutenant in Rankin’s fight for the initiative, says a shake-up is appropriate because of the inherent “meanness” of the property tax.

“Income tax is capped by the amount of money you earn,” Maxwell said. “Sales tax is capped by the amount of money you spend. Property tax should have a cap on it.”

But Ahrens notes that the Legislature in recent years has cut property taxes by $41 million. It also has imposed a 3 percent cap on the growth of local governments’ property tax budgets and has tripled the so-called “circuit breaker” property tax exemption for low-income elderly.

Gov. Phil Batt has said he might support some limit on annual increases in the taxable value of property. Skyrocketing market values have fueled much of the concern over property taxes in fast-growing areas like North Idaho.

But Republicans in the Legislature have quashed efforts for several years to increase Idaho’s homeowner’s exemption, which exempts part of a home’s value from taxes.

Initiative opponents say the state will have to raise other taxes and make sharp cuts in programs like Idaho’s college and university system, in order to come up with the money to replace property tax funding for schools.

“It would inevitably force the Legislature to raise some other taxes, there’s no doubt about it,” Simpson said.

Businesses now pay 70 percent of Idaho’s property tax, while homeowners pay 30 percent. Batt has warned businesses that if the measure passes, they’ll likely be targeted for new taxes.

That’s part of the reason businesses have backed the drive against the initiative. Ahrens said businesses also want a tax system that’s stable and predictable.

Maxwell and Rankin say they want the size of government reduced, and more money left in taxpayers’ pockets.

, DataTimes