State Politics

Frustrated by cap on tax exemption as your home value soars? This bill is for you

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You can get an extension to file your tax return but make your tax payment by the April due date. Here are instructions on how to get more time to file.

Bills to remove the cap on Idaho’s homeowners’ property tax exemption and to collect sales taxes on internet sales have been introduced in the Idaho House.

The first measure would re-establish the annual inflation adjustment on the value of the homeowner’s exemption. Under current law, half the value of a primary dwelling is exempt from property tax each year, up to a maximum of $100,000.

The bipartisan bill is sponsored by two Treasure Valley legislators, Republican Rep. John Vander Woude of Nampa and Democractic Sen. Maryanne Jordan of Boise.

Vander Woude noted that the exemption used to be “indexed” or tied to inflation, but that adjustment was later removed and replaced with a flat cap. The problem, he said, is that as market prices rise, a fixed cap exempts a smaller and smaller portion of a home’s total value.

“It’s time to look at indexing the exemption, due to rapidly increasing values,” he told the House Revenue and Taxation Committee on Tuesday.

The bill calls for the exemption to be adjusted annually by a percentage amount equal to the change in the all-transactions housing price index for the state.

The committee introduced the measure on a voice vote, without discussion. It should now come back for a public hearing.

Sales taxes on online purchases

The second bill directs certain retailers to collect the 6 percent state sales tax on internet sales. The revenue would be dedicated to future tax relief.

House Majority Leader Mike Moyle, R-Star, sponsored the bill. He said it’s consistent with last year’s U.S. Supreme Court decision in the Wayfair case, which freed states to begin collecting sales tax on online sales, even from retailers that don’t have a physical presence there.

Moyle stressed that this isn’t a new tax, since Idaho law already requires people to voluntarily pay the appropriate tax on their online purchases each year. This bill just shifts the responsibility for remitting the tax from individuals to retailers. Some retailers, including Amazon, already add it to their bills.

“It’s a positive thing for taxpayers, since it keeps them from unknowingly breaking the law,” he said.

Out-of-state retailers only need collect the tax if they have more than $100,000 in annual sales to Idaho residents. The requirement only applies to the state sales tax; they would not have to collect any local-option taxes.

Any revenue collected from the out-of-state retailers would flow into a special fund and be dedicated to future tax relief.

The bill doesn’t specify any particular type of tax relief, Moyle said. The money could be used to reduce income tax rates, to offset the cost of repealing the sales tax on food or other tax reductions as identified by the Legislature.

“That was the intent when we put that tax relief fund in place a few years ago,” he said. “We said once we figure out a way to capture sales tax from these online retailers, the money would go to tax relief.”

Rep. Jake Ellis, D-Boise, said dedicating this money to tax relief simply takes away revenue that could be used for education or other state needs. or (208) 791-9168. The Idaho Statesman contributed.