Your grocery-tax credit could increase, property taxes could stabilize with these bills

During the summer, Idaho House Republican leaders traversed the state holding town hall meetings focusing on the “absolute madness” of escalating property taxes and indicating they are gearing up for a tax-relief rumble during the 2020 legislative session.

That rumble got started Wednesday in the House Revenue and Tax Committee with the House’s top two GOP leaders pitching the session’s first tax-relief-related legislation.

House Speaker Scott Bedke’s bill pertains to the grocery tax; House Majority Leader Mike Moyle’s two bills pertain to property taxes.

Moyle said more property-tax related bills are expected in the coming days.

“It is time to start the ball rolling and get the ideas out there,” he said. “I think to fix the property-tax issue it is going to take a bunch of different bills to get there and it is going to take some time and some education.”

The committee agreed to print Bedke’s and Moyle’s bills. It will hold public hearings on each bill at a later date.

Increase grocery tax credit

Idaho’s 6% sales tax on groceries has long been a source of contention. Opponents say it places an unfair burden on low-income people; proponents say the grocery-tax credit alleviates that and the grocery tax is a needed revenue source. Eliminating both the sales tax on groceries and the grocery tax credit would leave the state with about a $100 million annual shortfall.

Over the last few sessions a grocery-tax battle has ensued, but resulted in no action.

Bedke, R-Oakley, launched the opening grocery-tax-relief salvo with a bill, H 352, raising the state’s grocery tax credit to $135 per person for all eligible taxpayers and their dependents. The current tax credit is $120 for individuals age 65 and older and $100 for all others.

Bedke explained to the committee that the tax credit “negates the effect of sales tax on food” for Idaho residents, while non-residents keep paying the tax on all their grocery purchases.

Bedke explained how the $135 tax credit negates grocery sales taxes paid at the register:

Taxpayers will be able to purchase $187.50 of groceries per month free of tax for each eligible credit. This is an annual amount of $2,250 of tax-free groceries per family member.

A single parent with three children or a married couple with two children will get $750 a month or $9,000 annually in tax-free groceries.

A married couple with three children or a single parent with four children will get $938 per month or $11,250 annually in tax-free groceries.

Increasing the grocery tax credit to $135 will cost about $48 million, Bedke said. But, he emphasized, that money will not come out of already budgeted revenue.

Recently, the state started putting its online sales tax revenue into a tax-relief fund.

“At this point we are putting about $6 (million) or $7 million a month in there,” Bedke said. “There is ample money in there in an ongoing way to fund this forever. ... It would not disrupt our current budget.”

Idaho Gov. Brad Little already has made his grocery tax-relief intentions clear.

In his state of the state budget address on Jan. 6, Little announced he wants to put $35 million from the tax-relief fund toward grocery-tax relief.

“One of the staples of conservative governing is to put money back into taxpayers’ pockets,” Little said at the time. “I have long supported tax relief for Idahoans on the most basic of needs — groceries.”

Bedke’s bill reflects Little’s intent, although it is a bit pricier.

Little said Wednesday he had not yet seen Bedke’s or Moyle’s bills and therefore had no comment.

Property tax budget cap

Moyle wants to rein in “out of control property taxes” by ratcheting down a law controlling how much cities, counties and other taxing districts can annually increase their property tax collections.

“I have heard of cases where people are paying more for property taxes than they are for their mortgage,” he said. “I don’t think that was ever the intent and I do not think any of us in here think that is a good idea.”

Moyle’s first bill, H 353, caps property tax budget growth at 3%.

“Currently in code you can get 3%, you can get new construction, you can get annexations … the list goes on and on,” Moyle said, referring to the complex rules that determine how much a taxing district can increase property tax collections annually. All taxing districts can collect property taxes; the state cannot.

Moyle emphasized the 3% cap only pertains to the property tax portion of a taxing district’s budget. Cities and counties also collect fees and receive revenue from other sources, including the state. Those revenue sources would not be included in the 3% cap.

Most cities get about 20% of their revenue from property taxes, while counties get about 40%, Moyle said.

Moyle said he expects his bill to get major push-back from cities and counties, but, “This bill starts us down the road to get the conversation started.”

Property tax freeze

Moyle also pitched a bill, H 355, to put a one-year freeze on the property-tax portion of taxing districts’ budgets while lawmakers and stakeholders work out property tax-relief solutions.

Moyle said his bill “stops the bleeding.”

“It puts a Band-Aid on it and it gives the opportunity for those of us in the Legislature to sit down and find a way to proceed with this.”

Cities, counties and other smaller taxing districts would not get less money during the freeze year, Moyle explained.

“They are going to get the same that they got last year,” he said, noting that the freeze “doesn’t necessarily mean your property taxes are going to go down,” because a property’s assessment could increase or decrease during the freeze year, affecting the property taxes owed.

This story was originally published January 22, 2020 at 3:00 PM.