House OKs host of property tax reform measures

BOISE – The House passed eight property tax bills Friday, including a measure to give relief to every homeowner in Idaho by reducing how much property tax revenue goes to schools.

The state would bump up the sales tax by a half-percent to replace the $125 million in property taxes that no longer would go to schools for operation and maintenance costs.

“This is the most significant property tax relief in the state of Idaho history,” said Rep. Ken Roberts, R-McCall. “This reduces everybody’s property tax.”

During the three-hour debate, in which the House speaker asked members to keep their emotions in check, lawmakers also approved raising the homeowner’s exemption to $75,000, with only one representative voting no.

The exemption, now capped at $50,000, hasn’t been raised since voters enacted it in 1982. If the increase becomes law, the average homeowner would pay nearly $300 less in property taxes per year.

The body also unanimously passed an expansion of a tax break for low-income senior citizens known as the “circuit breaker,” as well as a revolving state fund to lend money to the elderly to help pay their property tax bills.

Some legislators denounced the idea of reducing property tax proceeds for schools and said there is no guarantee that legislators will use the half-percent increase in sales tax to replace the money.

House Bill 678, the school funding proposal, passed 52-17; the sales tax increase, House Bill 679, passed 37-30.

Rep. Wendy Jaquet, D-Ketchum, said she feared the measure was passed as a favor to business interests that disapproved of an increase in the homeowner’s exemption. Jaquet said it’s possible the sales tax money could go for Medicaid or corrections instead of schools.

“There’s a problem with trust,” she said. “Our local school districts, local people, have a really hard time trusting this body.”

Her comment caused Republican lawmakers to fire back that the Legislature has never done anything to hurt schools and is committed to funding them.

House Tax Chairwoman Rep. Dolores Crow, R-Nampa, called the school funding and sales tax bills the only new and innovative proposals out of the more than 30 bills presented to answer residents’ cries for property tax relief. Lawmakers said that property taxes have been abused and pay for too many things in Idaho.

In the past 15 years, residential property has picked up an increasing portion of Idaho’s property tax burden, rising in 2005 to more than 63 percent, while other types of property saw their share fall.

“This takes care of the disease,” Crow said. “No other bills today do that.”

The bills now move to the Senate, where they’ll first go through committee hearings. Here’s a look at the other measures approved Friday:

“HB 422 would increase the “circuit breaker” tax break for low-income elderly and disabled residents. It passed 69-0. The income threshold would rise to $28,000 and the maximum benefit would rise to $1,320, an increase of $120.

“HB 421 would increase the homeowner’s exemption to $75,000, count land in the value and index it to inflation in the future. It passed 69-1, with Rep. Ken Andrus, R-Lava Hot Springs, voting no.

“HB 676 would repeal a tax loophole that developers and other rural landowners, including Gov. Dirk Kempthorne, have used since 2002 to cut annual payments to just pennies. It passed unanimously.

“HB 508 would let taxing districts exclude only half the value of newly annexed property from their 3 percent cap on budget growth rather than the full amount. It passed 42-27. Among those objecting was Rep. Frank Henderson, R-Post Falls, who said the measure would keep growth from paying for itself and pass on the costs of growth to existing residents.

“HB 480AA would allow local voters, with at least two-thirds approving, to order local governments to cut their budgets. It passed 62-7.

Staff writer Betsy Z. Russell contributed to this report.