Bill to end indexing of homeowners’ exemption surprises assessors, who call it ‘short-sighted’

County assessors, in town for an Idaho Association of Counties meeting, were stunned to hear the House Rev & Tax Committee vote this morning to remove the annual indexing of the homeowner’s exemption from property taxes. “It’s like Groundhog Day – déjà vu all over again,” said Kootenai County Assessor Mike McDowell. “If they fix it again at $100,000,” as HB 431, sponsored by Rep. Janet Trujillo, R-Idaho Falls, would do, “we’re putting ourselves back into the position we were in in 1982,” said McDowell, who’s been Kootenai County’s assessor since 2003 and has worked for the office since 1983. “It’s ridiculous.”

“It will ultimately be a tax shift to the homeowners, as the value erodes,” said Bob McQuade, Ada County assessor and current president of the Idaho Association of Counties.

Idaho’s homeowner’s exemption shields a portion of an owner-occupied home’s value from property taxes. It was created in 1980 with a maximum value of $10,000, then moved up just two years later to half the value of the home or $50,000, whichever was less.

McDowell said in 1982, the average home price in Kootenai County was $55,000, so most homeowners got a full 50 percent exemption. But by 2006, the average home price in Kootenai County was up to $220,000. That’s the year lawmakers raised the maximum exemption to $75,000 and indexed it, so it goes up and down with the Idaho housing market, as measured by the Idaho House Price Index.

Trujillo told the committee, “When we talk about good tax policy, the thing that we need to remember is keeping it stable and predictable.” The indexed homeowner’s exemption, she said, “is the opposite. … It makes it difficult for taxpayers of all types to predict their future tax burden.”

John Eaton, lobbyist for the Idaho Association of Realtors, told the committee that as home prices fell during the recession, homeowners saw their exemption fall, too, increasing their taxes. “So it really exacerbated the financial crisis that we had for the homeowners in the state,” he said.

But housing prices are now going up again. McDowell said the current average in Kootenai County is $215,000.

From 1982 to 2006, he said, the tax burden gradually shifted from all other types of properties to homeowners, because their exemption was capped, regardless of rising values. The total amount of collections isn’t changed by the exemption; just who pays which share.

McDowell, who is in town for an Association of Idaho Counties meeting, said, “We didn’t know this was even coming – we got blindsided.” If county officials had known, he said, “We’d have had somebody from the Idaho Association of Counties” at the meeting. “Unfortunately, what they’re doing is very short-sighted,” he said.

McQuade said the exemption did decline during the recession. “But it’s going back up,” he said. “For 2017, I expect it to be back up where it was at the height in 2008.”

The committee approved the bill and sent it to the full House, but two members voted “no”: Reps. Ron Nate, R-Rexburg; and Dan Rudolph, D-Lewiston.