Property tax break passes

BOISE – Idaho homeowners will receive a significant property tax break next year that will grow in the future, under legislation that won final passage at the very end of the state’s third-longest legislative session.

Gov. Dirk Kempthorne said late Tuesday that he’ll sign HB 421a into law, so the homeowner’s exemption from property tax will rise from its current maximum of $50,000 to $75,000; land will be included in the value instead of just improvements; and the top amount will be indexed to housing price inflation each year into the future.

“In the conclusion, there is now property tax reform, property tax relief,” the governor said shortly after lawmakers wrapped up their business. “I’m satisfied with the outcome, and so I’ll sign that.”

The 60-8 vote in the House to pass the bill came within hours of the close of the legislative session, which ended after 7 p.m. on its 93rd day. In the final vote, all North Idaho representatives voted for HB 421a except for Rep. Dick Harwood, R-St. Maries.

Harwood said, “That’s not going to do much for anybody – it’s crumbs.”

On average, homeowners can expect a break of just under $300 next year. But Rep. George Sayler, D-Coeur d’Alene, said the biggest impact will be in the long term, as the exemption grows with housing values. “The indexing, I think, will make it more significant over time,” he said.

The bill marks the first increase in the homeowner’s exemption since voters enacted the exemption by initiative in 1982 with the $50,000 cap. Since then, the property tax burden in Idaho has shifted from being paid mostly by businesses, to being paid mostly by owners of residential property, who now pay more than 60 percent of Idaho’s property taxes.

“We’ve had a very subtle shift each year from other properties to owner-occupied homes,” said Rep. Dennis Lake, R-Blackfoot, who sponsored the bill in the House. “This bill shifts that back, not in its entirety, in part. This is good legislation.”

Sen. Shawn Keough, R-Sandpoint, said, “Now it will grow in relation to what the market values are doing.”

The increase in the homeowner’s exemption is the centerpiece of a five-bill package of property tax reforms that passed this year – though many other reforms were debated as well, even up to the final hours of the session. In the end, the House and Senate couldn’t agree on proposals to shift school funding off the property tax and raise the sales tax, which would have added millions more in property tax relief.

Harwood, after the House adjourned, said, “This is not tax relief by any means. What we tried to do and what the Senate wouldn’t do was tax relief.”

The other property tax reform bills that passed – all of which the governor already has signed into law – expand the “circuit breaker” tax break for the low-income elderly and disabled; set up a state-funded deferral program to allow some of those same people to defer their taxes until they die or sell their homes; eliminate a tax loophole for some rural developers and land speculators; and simplify the process for charging impact fees to pay for the costs of growth.

Said Keough: “Some good steps have been taken.”

Rep. Frank Henderson, R-Post Falls, who co-sponsored the impact fee bill, said this year’s session took “an excellent first step” toward property tax reform. “The problem is so complex – it isn’t solved by one stroke,” he said.

Other highlights of this year’s legislative session included funding for $200 million in highway bonding, for projects including the completion of a major upgrade of U.S. Highway 95 from Worley to Setters and starting work on a new freeway between Coeur d’Alene and Sandpoint; a new $4 million push to eradicate milfoil from Idaho’s lakes and waterways; and additional state funding for water quality monitoring in Lake Pend Oreille and the Clark Fork River.

Lawmakers approved major reforms of Medicaid, the state-federal program that pays for health coverage for the poor and disabled; an $11.5 million initiative to upgrade state parks; and the state’s first public school budget to exceed $1 billion.

They also enacted longer sentences for an array of crimes, from sex offenses to gang activity to drunken driving, and approved a 300-bed prison expansion and a 400-bed inmate drug treatment center.

“This was one of the most productive legislative sessions during my eight years at the Statehouse,” said Kempthorne. “I know that our state is stronger today because of the work done this winter.”