SANDPOINT — The personal property tax may not be popular, but it’s still an important revenue stream, according to city, state and public service officials.
Debate continues in the Idaho State Legislature over whether or not to repeal the personal property tax, a government revenue stream drawn from business assets that fall outside of real estate. While many state and local officials agree that the personal property tax is not the most preferable way to obtain revenue, eliminating it without a planned replacement could be very damaging.
“As a former business owner, I can say the personal property tax is an awful tax — it discourages investing into your business,” City Planner Jeremy Grimm said. “But this would hurt us almost to a level where it would make us fairly ineffectual,”
That’s especially true for some of the urban renewal districts in Bonner County. For example, almost 60 percent of property tax funding in the Northern Urban Renewal District in Sandpoint, or $217,720 out of $367,663, comes from personal property tax, according to data from the Idaho Tax Commission. Oldtown’s urban renewal project, despite its comparatively small total property tax intake of $4,951, also gets just over half of that from personal property tax.
However, the percentage of tax income drawn from personal property doesn’t necessarily have to be extremely high to hurt a budget. The city of Sandpoint, for instance, receives $220,979 from taxed personal property out of a total $3,410,339. While that only amounts to 6.5 percent of the total, Grimm said that still amounts to an entire project or two that can no longer be funded. And considering that the loss of the revenue is a yearly occurrence and not a one-time hit, the missing cash starts to really hurt over time.
Ponderay presents another situation where the lack of personal property taxes could be troublesome. As a city that operates on a much smaller budget than Sandpoint, a missing $131,775 out of the total $740,033 in property taxes would likely take its toll.
The lack of a personal property tax would have an interest affect on school districts as well. For one thing, Lake Pend Oreille School District receives $538,828 from personal property taxes — a solid chunk of change in itself.
Because local supplemental levies operate on a fixed dollar amount, however, the lack of personal property tax would mean an effective increase on property and home owners. If voters pass the proposed $7.8 million-a-year levy in March and personal property tax no longer exists, it will mean an effective increase of the levy rate on property tax payers.
Gov. C.L. “Butch” Otter’s proposal for local communities to replace that income through local option taxes has also been a controversial one — Sen. Shawn Keough and Rep. George Eskridge have both said they would not support an elimination of the tax without a stateside replacement.
For one thing, it would require convincing communities to pass the measures in local elections. Sandpoint and Ponderay experienced the difficulty of that in November, when a pair of coordinated local option taxes failed at the polls. A majority of Sandpoint voters supported the measure, but it failed to achieve the required 60-percent supermajority. A majority of Ponderay voters opposed the measure. While Grimm said relaxing the requirement to a simple majority could be feasible, the approach is not without its difficulties.
“We’re running pretty lean right now, and to have (an elimination of this tax) hit us on top of everything else would be very difficult for Sandpoint,” Grimm said.