BOISE – Idahoans could see tens or even hundreds of millions of dollars in property tax relief under ideas that won preliminary support Tuesday from a 14-member joint legislative committee. The panel endorsed 19 property tax relief concepts for further exploration, but four garnered unanimous votes:
“ Increasing the homeowner’s exemption.
“ Increasing the “circuit breaker” exemption for the poor, elderly or disabled.
“ Eliminating a 2002 loophole that now allows certain developers and land speculators to qualify for farm exemptions, shifting millions in taxes to others in their counties.
“ Replacing all or part of the property taxes that now go to school maintenance and operations with state funds, which could come from the sales tax or other sources.
“Just the school maintenance and operations is pretty significant,” said Sen. Shawn Keough, R-Sandpoint, co-chairwoman of the special joint committee. “In my district, that’s about 40 percent of the property tax bill.” Replacing it with state funding, she said, would bring “instant relief.”
Statewide, the school maintenance and operations tax levy collects $272 million a year, nearly a quarter of the total property taxes collected. The rest of Idaho’s property tax goes to local government operations and school bonds – none of it goes to the state.
If the state covered the school operations property tax from sales tax alone, it would require an increase in Idaho’s sales tax, from 5 percent to 6.5 percent. But some committee members said that’s not out of the question. Idaho just lowered its sales tax from 6 percent to 5 percent on July 1, after a temporary, two-year increase designed to ease the state through a budget crisis.
“The fact of the matter is, when we had the extra penny, I didn’t hear anybody up in arms over it,” said Sen. John Goedde, R-Coeur d’Alene. “In fact, people commented that we were dumb to let it go.”
Rep. George Sayler, D-Coeur d’Alene, said he has some concerns about shifting the school funding. He noted that when lawmakers, at then-Gov. Phil Batt’s urging, replaced a quarter of the school maintenance property taxes a decade ago, they promised full replacement of the money. But then, just a few years ago, the Legislature capped the replacement money, leaving school districts short millions each year from the funding they would have had from property taxes.
“There would need to be some guarantees that that money would come in at the level promised,” Sayler said.
The joint property tax committee held a dozen public hearings in every part of the state over the summer, and heard from nearly 2,000 Idahoans about their concerns and suggestions on property taxes. Long the state’s most-hated tax, property taxes have been rising quickly in fast-growing parts of the state, particularly for homeowners. Residential property owners now pay 61.6 percent of Idaho’s property tax – up from 47.1 percent in 1990.
Two voter initiatives are under review in the state Attorney General’s office, seeking to cap property taxes, and anger over the issue has been building. Residents rallied in Sandpoint and Coeur d’Alene in March as a House committee killed eight property tax relief bills. At the statewide hearings this summer, the top request was for lawmakers to increase the homeowner’s exemption, with many saying they fear they’ll be taxed out of their homes.
Idaho’s “50-50” homeowner’s exemption was enacted by voter initiative back in 1982, exempting from tax half the value of the improvements for an owner-occupied home, up to $50,000. That amount never has been increased for inflation. The concept endorsed by the legislative panel Tuesday called for looking into increasing the amount, indexing it to inflation, and including land as well as buildings.
Goedde said, “If we index it to some inflation factor, we can fix it once and for all.”
The state Tax Commission estimates that if the maximum exemption were increased to $75,000 and land were included, it’d grant homeowners nearly $100 million in additional property tax relief, though non-homeowner property taxpayers would pick up the difference.
The “circuit-breaker” hardship exemption now is capped at $1,200, and the maximum income to qualify is $22,000. Both could be increased; the state picks up the cost of this exemption.
The 2002 loophole that extended farm tax breaks to land speculators is now exempting $788 million in property from taxes, forcing neighbors to make up the difference.
“There’s no question this exemption has to go,” said Sen. Tim Corder, R-Mountain Home.
Among the other proposals that a majority of the committee endorsed Tuesday were exploring local-option taxes, freezing assessed property values for one year, deferring increases in property tax until sale, reviewing all existing exemptions, requiring disclosure of property sales prices, using a five-year rolling average for taxable values, and improving public participation in local government budgeting.
The joint legislative committee will meet again in October, and may still have several meetings before it settles on its final recommendations to the full Legislature. Any recommendations will need a two-thirds vote to move to the full Legislature.
Keough said she’s hopeful that any recommendations backed with the two-thirds support of the panel – which includes lawmakers from both houses, both parties and all parts of the state – will get a full and fair hearing in the full Legislature.
“I’m fearful if that doesn’t happen, it’ll reaffirm what we heard out on the road, that the Legislature has become arrogant and out of touch,” she said. “I don’t think that’s true of this committee – I think we’ve demonstrated that.”
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