Exemption Wars

Idaho's battle's over how to pay for state services is back on

What with schools out, trees greening, graduations and wedding celebrations, June is bustin' out all over with happy talk. But June 20 in Idaho is the deadline for paying property taxes to the counties — and what a wet blanket that casts over the bubbling June picture.

I was brought up to repeat: "It's a privilege to pay taxes." And I really do believe that to be a healthy mantra. We are fortunate when we own parcels of property that are worth taxing. And we are fortunate to have the public services that shield us from harm and keep the wheels of communal living turning.

But that's a Pollyannaish view of the world. More people agree that property taxes exist to be universally loathed, and the Bible tells us it has always been so. (Tax collectors weren't popular in the days when Alexander the Great spread Greek culture over much of what is now Turkey and the seething Middle East. So what's new?)

So why did the 2016 Idaho Legislature vote to raise future residential property taxes by eliminating the inflation index on the homeowner's exemption? Does that seem politically smart? Or fair? My constituents hate property taxes, so I'll... raise them? Most of those constituents won't feel the pain for a few years down the road, so we'll think about that tomorrow — kind of like Scarlett O'Hara.

Of course, the picture is never quite that simple. The lobbyists for the Idaho Association of Commerce and Industry, who pass out campaign funds to legislators who agree with them, has argued that the current method of indexing the homeowner's exemption so that it increases every year as housing prices rise is hurting the broader business community. (And that's despite the fact that our businessmen and businesswomen live in houses, too.)

What is the Idaho homeowner's exemption anyway? Currently, owners of a house worth $200,000 would subtract $94,745, the maximum cap set by the Idaho Housing Price Index, in estimating their property tax bill, and pay property taxes on nearly half of their home's value. The new legislation removes the Housing Price Index as a factor and substitutes a maximum exemption of $100,000.

The Idaho homeowner's exemption has a tortured history that began as a rumble in the 1960s, when property values were rapidly on the upswing and homeowners were paying an increasing portion of the entire county property tax bill. In 1982, a statewide initiative effort was launched to create a permanent homeowners exemption. Aroused and activated homeowners carried initiative petitions door to door. I was in the thick of it. The campaign had no advertising dollars to spend, and we signature gatherers were all volunteers. Despite the lack of advertising dollars, the measure passed with 56 percent of the vote.

Passage of the exemption didn't mean the fight was over. Republican legislators continued to introduce bills to undercut or even repeal the exemption. In 1986, a challenge from eastern Idaho businesses was stopped in its tracks by the Idaho Supreme Court, which ruled that the exemption was legitimate. The ruling also noted that the homeowner's exemption helped equalize the tax burden between businesses and homeowners.

I prowled around in my files and pulled out a piece of my campaign literature from 1994 promoting a tax cap initiative. A 1994 graph showed that despite the exemption, the percentage of growth in residential property taxes was still outpacing business growth.

It's been a perennial seesaw through the decades, with housing values continuing to grow faster than values in the business sector. As a result, homeowners have been carrying an ever-expanding load of the property tax burden.

The demand for new housing for families causes new houses to be built. New neighborhoods need new schools. But we don't want onerous property taxes to fall primarily on young families. Healthy communities require a sound educational system to foster a healthy economy, just as it launches students toward a bright personal future. So everyone's taxes are needed to support the schools. Fortunately, Idaho voters have generally agreed with that during these recent tough years.

The time has come to take a critical look at how Idaho funds its most important budgets. This is a question that gets to the crux of public life — how to most fairly collect the money that keeps our state running. It's time to shine more light on the tax breaks that add up to millions of dollars and never sunset. And it's important to be mindful of societal changes, too. Our modern economy is in a state of constant flux. Retail stores pay large property tax bills. Yet retail businesses now face stiff competition from online marketing.

If the Idaho legislature would clean up the tax breaks, accept federal dollars for Medicaid and quit getting embroiled in expensive lawsuits, then there surely would be enough general fund dollars available to give to counties to subsidize their local taxing district budgets.

Then the Idaho legislature could restore the homeowner's exemption index, be equally kind to commercial property owners, and invest newly expanded general fund dollars in schools and other local taxing districts.

Would that it were that simple.♦

Print Town USA: Spring Edition @ Spokane Print & Publishing Center

Sat., April 17, 12-6 p.m.
  • or

About The Author