Tax relief measures abound in Legislature

My final column of last year’s session addressed a new property tax bill that would have eliminated property taxes on all primary residences with up to 5 acres of land.

This was a bold proposal that generated strong support as well as a strong opposition. Ultimately, the bill was held in committee, but the overarching issue remained.

Throughout the interim, most legislators continued to hear about the stress many of our constituents were feeling regarding increasing assessments and the increase in property taxes that often accompanied them.

Upon arriving in Boise for the legislative session, there were already a handful of ideas being floated around the legislature. Some ideas had been worked on for over a year, and some were relatively new approaches to solving the same problem. The efforts of the House Revenue and Taxation chairman have been to gather the interested parties together in an attempt to refine these ideas into two or three viable options that the committee can then vote on. Last Thursday, three versions were presented to the committee that the chairman later explained to the entire Majority Caucus.

The first idea came from a senator who had been seeking input and consensus from a variety of sources throughout the state, but mainly in Ada County. This option directly addresses the amount of taxes owed on a property owner's bill. By taking 4.5% of annual sales tax revenues, the amount of tax relief would be equally divided among every property owner in the state eligible for the homestead exemption, and would provide $150 million from the general fund surplus this year to start the program.

The second plan is from a representative who, similarly to the senator, garnered support and feedback from many sources. This plan addresses the homestead exemption by indexing the amount of exemption in relation to the assessed value of the home. It raises the initial exemption to $224,360 from $100,000, as well as adjusts the maximum amount available to exempt from 50% of value to 55% of value.

Annually, the Idaho Tax Commission will determine the amount of the homestead exemption by using a formula based upon recent home sale prices. This means that during inflated years, like we are experiencing, the exemption will rise as home values rise, and during depressed years, it will fall as values fall. However, the minimum amount that the maximum exemption can fall to will be held at $224,360. A downside to this proposal is that a tax shift occurs from residential properties to all other taxable properties, and, if your home is valued below $450,000, you will not receive as much of a reduction in taxes as properties that are valued at $450,000 and higher.

The final plan proposed came from a collaboration of two representatives, who met with many stakeholders at the beginning of the session, but had been working through the details before the session began. This plan is multi-faceted, touching upon many different property tax dimensions, but primarily attempts to remove the burden of school bonds and levies. Initially, $300 million is appropriated from four different sources, and is distributed to school districts using the average daily attendance formula currently in effect.

These dollars must be used in specific ways, prioritized as follows: first, for the payment of school bonds, second, for the payment of school levies, third, for safe school facilities and life, safety, and health issues, and fourth, to be saved for future facilities needs. The savings aspect of this hierarchy is included in order to defray the need for future bonds.

Additionally, the language allows districts to bond against the anticipated revenue in the municipal bond market and forego property tax bond elections that add to property taxes rates. Included on the bill is the elimination of the two additional election dates that school districts are allowed outside of our normal primary and general election dates, an increase in the homestead exemption to $150,000, an adjustment of the requirements to qualify for circuit breaker relief of property taxes which should restore all those who dropped off last year, and, finally, it relieves cities and counties of their obligation to fund public defense. This bill has many different parts which give legislators something to both like and hate within the same bill.

The House Revenue and Taxation Committee will most likely be hearing these bills next week and choosing which path to take. Ideally, each of the authors will consult with each other, and try to find common ground that would result in a unified bill. If this does not happen, all three bills could come out of the committee and the decision may be left to the floor of the House, or be passed on to the Senate. It is highly unlikely that we will not pass some sort of property tax relief this session.

The challenge is to ensure that the law affects all taxpayers similarly and to craft a law that will not only address an immediate need but last into the future.

Sage Dixon represents Bonner and Boundary counties in the Idaho Legislature in District 1B. He can be reached at sdixon@house.idaho.gov.