BOISE — The House Revenue and Taxation Committee on Thursday heard three proposals to provide property tax relief — a top issue legislative leaders highlighted at the start of the session.
Each piece of legislation took a different approach to solving the issue. One would use a percentage of sales tax revenue to reduce property tax bills, one would re-institute indexing on the homeowner’s exemption, and the third includes sweeping changes to add funding for school districts to pay off bonds, change election dates for bonds and levies, and increases the homeowner’s exemption.
Grow’s proposal: Use sales tax revenue
Sen. Scott Grow, R-Eagle, proposed dedicating 4.5% of annual sales tax revenue toward subtracting from the total of each homeowner’s primary residence property tax bill, excluding voter-approved bonds and levies.
He also is asking for $150 million from the general fund surplus to go toward relief in 2023.
Grow told the committee he has been frustrated with the continued focus on income tax relief over the past few years without addressing property taxes.
“I have been working for years, as you have chairman, trying to get some property tax relief,” Grow told the committee, addressing Chairman Rep. Jason Monks, R-Meridian. “In all my years as a CPA, I never had any client complain about Idaho income tax.”
Grow said his proposal wouldn’t raise taxes or shift the burden from one group to the other. He said over the past few years, the property tax burden has gone from commercial onto homeowners. He said he’s owned an office building for 20 years and its property taxes have remained flat, while his home’s have continued to rise.
The tax reduction would be applied after the homeowner’s exemption, which currently exempts the first $125,000 of assessed value on a home. The amount deducted would vary depending on sales tax revenue, which he said has continued to rise each year. It’s estimated to cost around $150 million a year.
The proposal wouldn’t include relief from bonds and levies, because he doesn’t want to incentivize passing them, he said, and it’s not a “budget enhancement” for local government.
Grow began working on the issue in May, the Idaho Press previously reported, and met with stakeholders including other lawmakers, associations of Idaho cities, counties and taxpayers, the Idaho Farm Bureau, the Idaho Freedom Foundation, the governor’s budget director and others.
He said while it’s not the state that sets and collects property tax, it is still the Legislature’s obligation to address the issue.
“It is the taxpayers’ money and the taxpayers are asking for relief, and they want it on property taxes.
Skaug’s proposal: Index the homeowner’s exemption
Rep. Bruce Skaug, R-Nampa, would like to index the homeowner’s property tax exemption, something that had been done in the state from 2006 to 2016, when the Legislature removed the indexing formula.
The homeowner’s exemption is currently capped at $125,000, but Skaug’s proposal would put back in place the formula that raised the cap to adjust for Idaho housing prices, setting the initial exemption cap at $224,360. Each year, the cap would be set using the Federal Housing Financing Agency housing pricing index for Idaho.
Skaug said removing indexing in 2016 has benefited big corporations the most.
“For the past six years, homeowners have shouldered an increasing share of the property tax burden,” he said. “For the past six years, commercial properties have enjoyed the financial benefits of decreasing property taxes for them.”
In an analysis of 2016 home and property owners, commercial properties are paying an average of about 24% percent less in taxes since 2016, he said, while homeowners are paying an average of around 20.5% more in that time frame.
“That is the inequality that has happened, and that’s just on those old properties. It’s probably the biggest tax shift in recent Idaho history,” he said.
He said putting the previous indexing system in place is “predictable,” because it was done for 10 years before being removed.
Like Grow, Skaug said that constituents have been asking for a solution to the impact quickly rising home values has had on local property taxes.
“They wanted relief last year, and we did not deliver,” he said, also urging the committee to consider the other proposals in addition to his.
Moyle’s proposal: Give money for school funding, increase the homeowner’s exemption, increase circuit breaker
House Speaker Mike Moyle, R-Star, is proposing sweeping changes all aimed at providing tax relief through different means.
His bill would create a School District Facilities fund, with money from the Public Schools Income fund, Wayfair revenue that comes from online sales taxes, Tax Rebate fund and general fund surplus to total $301.9 million. This money would then be distributed among school districts based on their average daily attendance and be used to pay off bonds. If bonds are paid off, they could use it to, in descending order of priority, pay levies; address expenses “necessary to provide for, safe school facilities and address life, safety, and health issues”; and be saved for future construction needs.
Taking the bond burden off of local taxpayers will result in relief, Moyle said.
“We have school districts across the state, some that refuse to pass bonds, concerned over property taxes that have issues,” Moyle said. “... there’s issues that need fixed that these school districts don’t have the funds to take care of, this provides that opportunity. Tax relief, again on the other side, because the taxpayers don’t have to tax themself to pay for it.”
The bill would also eliminate March and August elections. He said many people didn’t participate in votes taking place during these months because they were out of town or didn’t know about them, so he chose to consolidate election days to May and November.
Additionally, it would increase the number of those who qualify for the circuit breaker, or a tax exemption for homeowners who are elderly, widowed, or have disabilities. It would move up the limit to the greater of 200% of the county median assessed value or $400,000.
Last year, lawmakers moved up the cap to 150% of county median assessed value, which still resulted in people who had previously been qualified getting kicked off the program due to soaring home prices. HB 389, which Moyle sponsored in 2021, had limited qualifying homes to 125% of median assessed value in the county, which eliminated many recipients from getting the reduction.
“A lot of you have heard concerns about the circuit breaker,” Moyle said Thursday. “And some of our friends that got forced off the circuit breaker … so this changes the qualifications on the circuit breaker. It picks up a lot of those people that were pushed off.”
Moyle’s bill also would increase the homeowner’s exemption from $125,000 to $150,000. It also eliminates the city and county obligation for public defense and moves the funding source to an ongoing source of revenue.
“It provides property tax relief to all of our property tax payers,” Moyle said. “It provides the opportunity for our schools to function and get their building needs taken care of, it increases the homeowner’s exemption, it takes our elderly and low-income that pushed off the circuit breaker and gets them back on the circuit breaker, and it’s a good bill that tries to encompass and touch all the points you’ve heard about as we try to solve the problem of property taxes.”