Batt Maps New Effort To Sell Tax Relief Plan

Gov. Phil Batt is trying a new tack in his effort to convince voters to defeat the One Percent Initiative in November.

Convinced his own 1995 property tax relief plan has not been able to prove itself yet, the Republican governor is proposing changes to fix what he sees as a flaw masking the relief provided by the scheme.

Batt has proposed bringing public schools, one of the largest collectors of property taxes, under the plan’s restrictions - an effort many hope will blunt the homeowner revolt fueling the One Percent Initiative.

Neither of the tax-cutting plans makes local school officials happy.

Batt’s proposal costs them millions of dollars in local tax support. The initiative completely eliminates local support, shifting that estimated $228 million to the state. With per-student cash backing already eroding in the Capitol, that makes the future of education financing murky at best.

The initiative’s author, anti-tax activist Ron Rankin, calls Batt’s latest proposal “smoke and mirrors” and predicts voters will not be fooled by another promise of legislative action to ease the burden of Idaho’s most hated tax.

While the 1995 legislation shifted more than $40 million in school financing from property taxes to the state treasury’s income and sales taxes, Batt has always maintained that the real value of the package was the 3 percent limit on the annual increase in cash raised by the property tax.

The point was to offset escalating property values by requiring property tax-reliant local governments to reduce tax rates so hikes in property values do not send property tax bills soaring.

And Batt proudly points out the cap kept property tax collections in 1995 at just 1.9 percent more than 1994, the slowest growth in 14 years.

The problem was that while local governments use variable tax rates that can be adjusted in response to rising values, the rate for public school operations is set by state law at $3 per $1,000 of taxable value.

That essentially means that if a homeowner’s taxable value rose 14 percent - as it did on average statewide from 1994 to 1995 - the tax payment to all but the school district still went up no more than 3 percent because the tax rate was adjusted to offset the value hike.

But since the school district rate is set by law, the payment to them went up 14 percent - more than enough to erase any impact of the $40 million-plus tax cut included in the package since schools collect 42 percent of the $665 million paid last year in property taxes.

“I’ve been concerned that people haven’t seen as much tax relief under my plan as they should have,” Batt said. “I think that’s a loophole that we failed to close.”

Adopting the suggestion of House Democratic Leader Jim Stoicheff, a conservative Sandpoint educator, Batt has proposed slapping the same 3 percent lid on annual revenue increases for school districts.

Combined with another concerted campaign by business, government and education against the initiative, Batt believes the promise of fine-tuning the current law can have a telling effect by November.

Legislative tax experts estimate his proposal would reduce property tax revenue to school districts by as much as $12 million - money the governor does not want the state to make up.

That has local school officials wondering.

“I’m rather torn on strategy,” admitted Claire Major, a Gooding School Board member and president of the Idaho School Boards Association. “If people understand what the real impact of the One Percent is, I think Idaho voters will defeat it,” Major said. “If we have no other alternative, it would be better. But I personally believe in Idaho voters.”

Rankin believes in them, too, especially when they are homeowners who have seen dramatic increases in property values in the past year as counties try to bring all property up to market rates. The impact was a $5.3 billion hike in taxable value to nearly $44 billion statewide in 1995.

“It’s not going to make that much difference,” Rankin said. “There is no way the taxpayers of Idaho are gullible enough.”

After being rejected by 65 percent of the voters in 1992, the initiative was revived after passage of the 1995 tax relief plan because Rankin felt it did not go far enough.

Rankin is intent on the state making good on the property tax-relief provision of the “Republican Contract With Idaho” Batt signed a month before he was elected.