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Spokane, Washington  Est. May 19, 1883

Candidates assess tax reform

Betsy Z. Russell Staff writer

BOISE – The candidates vying for a chance to run the state for the next four years have mixed views on current Idaho Gov. Jim Risch’s proposal for a special session of the Legislature this summer to cut property taxes.

If Risch calls a special session, he could preside over major changes in Idaho’s sales and property tax systems – just before a new governor takes office in January.

“Everywhere I go, people are concerned about their property taxes, and I think it’s important enough to warrant a special session,” said 1st District Congressman Butch Otter, the Republican candidate for governor. “However, if Gov. Risch and the Legislature are unable to come to agreement on the issue, Idahoans and legislators can expect real, tangible property tax relief to be the first bill I propose as governor.”

Jerry Brady, the Democratic candidate, said, “If it were really open to considering all the aspects of property tax and looking for a solution, I’d favor it. I don’t favor the solution that they are bottling and packaging and preparing to get through, because it is simply a shift of taxes. Middle-class people, ordinary families are going to end up paying the same or more under sales tax than they are under property taxes, and we’re not addressing the issues long-term.”

He added, “The issue long-term is that property taxes on homes continue to go up far more rapidly than on any other kind of property.”

Risch has called for eliminating the current $250 million annual property tax levy that pays for basic school operations, and raising the sales tax and using part of a state budget surplus to make up the funding for schools. He’s still negotiating with legislators and says he won’t call a special session unless there’s a plan with enough votes to pass both houses.

That would give a property tax break of roughly 20 percent to everyone who pays property taxes, including homeowners, businesses, utilities, second-home owners and more. The trade-off would be paying a little more sales tax on every purchase, including groceries, which in Idaho are fully subject to the sales tax.

Otter said he agrees with Risch on shifting school operations funding off the property tax. “I support removing school maintenance and operations costs from the property tax and making up that ongoing funding difference from the state general fund surplus, reductions in other government spending and a modest increase in the sales tax – which is by far a more equitable method of collecting revenues than the antiquated property tax model,” Otter said.

Brady disagreed. He’s instead proposed a four-point plan to provide property tax relief by increasing the homeowner’s exemption to $100,000; allowing local-option taxes such as real-estate transfer taxes, local sales taxes and impact fees as alternatives to property tax; capping the growth in the school operations levy at 3 percent a year; and launching a “performance review” aimed at finding ways to cut government costs.

“I want growth to pay for itself,” Brady said.

The school operations levy, which is set at $3 for every $1,000 in property value, is the only major property tax levy that’s exempt from the current 3 percent cap on growth in local government property tax collections. That cap forces cities, counties and other taxing districts to lower tax rates if values shoot up, to keep their total take from growing by more than 3 percent, though there are exemptions for new construction and some other items.

That’s prompted additional attention to the school operations levy as property values have shot up around the state, particularly in desirable, high-growth areas like Kootenai and Bonner counties.

State lawmakers approved an increase in the homeowner’s exemption to $75,000 this year – the first increase in the $50,000 exemption since voters enacted it by initiative in 1982. Residential property owners have been picking up an increasing share of Idaho’s property tax burden and now pay more than 63 percent, up from 47 percent in 1990. During that same time period, the share of taxes paid by owners of all other types of property dropped, including commercial, agricultural, timber, mining and utility property.

Ted Dunlap, the Libertarian candidate for governor, said he opposes a special session. “Obviously if they didn’t do the business during their regular session, it must not have been the right thing to do,” he said. “The idea being floated is basically not to change our outgo, but to continue with the same exact expenditure patterns we’ve always had, and to shift the burden from property taxes over to some other tax. That is not an improvement.”

Dunlap said he views the special session idea as “pure power politics on Jim Risch’s part. This is not something we slam overnight cures on. A longer, more methodical process is appropriate.”

Asked if he’d call a special session if he were governor, Dunlap said, “If I was governor for a couple months I might consider it, but if I was really governor I would not.”

Marvin “Pro-Life” Richardson, the Constitution Party candidate for governor, said he’d support a special session, but for a different purpose. “My proposal to the Legislature would be to cut spending, especially in education,” he said, adding, “I’m totally against public education. I think education is not the proper role of government.”

Otter answered a reporter’s questions in writing and didn’t elaborate further on his position.

Brady said, “The solution the Republicans are fashioning is shortsighted, it is opportunistic, it is going to hurt education, take more local control away from education, and put education on a less stable basis.”

He said if overall values and taxes continue to shoot up in fast-growing areas, the effect of replacing the school operations levy could be eaten up by another year’s increases.

“Special sessions should be for a true emergency that could not be dealt with in a more thoughtful fashion,” Brady said.

He said a more appropriate move for a special session would be to use part of the surplus funds to “buy down increases in property taxes on those who can least afford it” for this year only, then work on a longer-term solution. “It’s going to take a strong, bipartisan solution, which won’t come easily and can’t be done in a special session,” he said.