Taxes, exemptions, and what lies ahead

The first five weeks of the legislative session are completed, and the pace has picked up considerably. There are several procedural matters that are now coming into play.

There is a need to put sideboards on the number and scope of new bills. Otherwise, the length of the legislative session could grow to be a problem. After all, the number one duty of the Legislature is to develop and set a balanced budget for the state (and to fund state constitutional operations). Adding new legislation isn’t always necessary. Deadlines for the introduction of new bills have been set.

Several legislators have been drafting property tax relief bills for months. Two weeks ago the first three bills (HB 77, HB 78, and HB 79) were introduced to the House of Representatives. None of the bills will likely make it to and through the Tax and Revenue Committee (and then to the floor of the House for a full vote) in their current form. All three bills are available for reading on the state legislative website.

HB 77 calls for approximately 4.5% of state sales tax proceeds to be pooled and then divided by the number of homeowner's exemptions in our state. The result would be a flat amount sent to each homeowner. The estimated amount of the payment for each Idaho homeowner was $600/year. Sales taxes have proven to be a steady source of revenue for the state. With our increasing population and inflation, the rise has been higher the last two years.

HB78 increases the homeowner's exemption to $224,360 (currently its $125,000) and then indexes that amount for future years. The homeowner's exemption had been indexed until 2016. The new amount is what the drafters figured it would be had the indexing continued. The homeowner's exemption helps to level the property tax burden. In recent years, the value of residential properties has increased remarkably. The value of commercial property has not changed as much. So the burden of property tax has shifted to residential property owners.

HB 79 uses several sources of revenue to send approximately $300 million to the school districts to use toward:1) service bonds to reduce property taxes 2) service levies to reduce property taxes 3) pay for school safety improvements 4) save for future school maintenance and construction projects 5) future funds could be used for construction bonding. This bill also eliminates the March and August special election dates. The homeowner's exemption is increased to $150,000. The Circuit Breaker program triggers are increased by this bill as well.

The three bills approach property taxes in different ways. Each property owner can likely see how their tax burden will be impacted. Some of the "fixes" are one-time adjustments and some are system shifts.

The number one concern among those I meet in our District is property tax, support for our school system is usually number two. Our property tax payments reflect a combination of the two issues. The base property tax assessment is often half of the amount. The other half is made up of the various taxing districts' levies and bonds.

The levies and bonds are more than those of just schools. For example, We all pay a levy for Emergency medical services. Other levies are only paid by those in certain areas, think sewer and water districts. Regardless of the amount of each levy and to whom it funds, the combination of all the taxing districts' levies and bonds make up our property tax. Some will say reducing any of the costs of the individual taxing districts, should be viewed as property tax relief.

I think HB 77-79 all have merit. To move them from proposals to statutes will require Legislators to determine what works best for their Districts and their voters and then to make a vote for approval.

I have concerns regarding issues not completely addressed.

Uniformity, while it's likely a goal, most taxpayers want to think everyone is paying their fair share. The difference between commercial and residential tax rates is an issue. The taxing of new development was changed a few years ago and has reduced that revenue source for cities and counties. They now say growth isn’t paying for growth. HB 78 does address some of the homeowner's exemption issues but the property valuation part of the formula needs to be an average of 3-5 years to reduce the cost spikes. I have friends who talk of 50% increases in their tax bill over a short period when they haven’t done major improvements on their property. The problem was a few houses in their neighborhood recently sold.

Security, the idea that taxes will not increase too rapidly. Most of the caps on taxing are on the taxing districts themselves (I call that the ceiling) instead of the taxpayer. I'd like to see a guarantee that the increase in property tax couldn’t be over a set amount (for example 1-3%) without voter approval in most cases. Some say this change could take a state constitutional amendment. I’m not sure but the uncertainty of rises in property taxes year to year is a real issue.

Fairness, HB 79 sends money to school districts for bond and levy reduction and ultimately for school construction. The amounts are based on average daily attendance. This formula method is hard on our three school districts.

I will do what I can to reach out to our local voters and elected leaders to learn more from them and then influence the final property tax bill.

Thanks for reading. You can email your thoughts and suggestions to msauter@house.idaho.gov.

Mark Sauter represents Bonner and Boundary counties in the Idaho Legislature in District 1A.