Idaho GOP wants to eliminate property taxes for some residents, increase sales tax
Idaho Republicans are floating legislation that would eliminate most property taxes on owner-occupied homes while increasing the sales tax — to the highest rate in the nation.
The proposal, which has yet to be finalized, would eliminate all property taxes for owner-occupied residential properties, except those associated with voter-approved bonds and school levies. It would remove city and county levies, along with other taxing districts, such as highway, cemetery and mosquito abatement districts, and replace those collections with an increase in sales tax.
“It’s a significant change,” Sen. Jim Rice, a Caldwell Republican who is helping write the bill, told the Idaho Statesman on Monday. Rice is working with Sen. C. Scott Grow, an Eagle Republican, and other stakeholders to draft the legislation.
Idaho’s owner-occupied housing rate is 70%, according to the American Community Survey’s five-year estimates from 2019.
The proposal would cut about $760 million in property taxes, Rice recently told Red Wave Radio, a talk show hosted by GOP Chairman Tom Luna and Ada County Republican Central Committee Chairman Victor Miller.
“This is a major, big-dollar cut,” Grow said on the show.
One home in Meridian, for example, could see a decrease in property taxes from $2,600 to less than $600 annually, Rice said on the show. He also told the Statesman the proposal would benefit first-time homebuyers by reducing the amount of property tax for which they must qualify.
The reduction in property taxes would be offset by an increase in the sales tax, from 6% to 7.85%, Rice told the Statesman. With that jump, Idaho’s sales tax would surpass California’s as the highest in the nation, according to data collected by the Sales Tax Institute, a Chicago-based tax education and consulting firm.
New sales tax formula for local government revenue
Last fiscal year, 11.5% of the $2.5 billion in sales taxes collected by the state went to local governments, according to the Idaho State Tax Commission’s annual report. A new formula for distributing sales tax would replace local governments’ property tax revenue stream under the new proposal, Rice said on the radio show.
Rice told the Statesman local government representatives advised the senators on the legislation, but some have yet to weigh in.
The senators are also looking to increase the grocery tax credit by $60 — from $100 to $160, and from $120 to $180 for seniors — which is meant to help shoulder the sales tax increases.
A House bill that would increase the grocery tax credit by $20 is awaiting a hearing in the Senate Local Government and Taxation Committee, which is chaired by Rice.
Rice said the new property tax bill likely will be introduced in the coming days.
If passed, it would be the second-major tax bill this session. The Legislature already passed, and the governor signed, a $600 million income tax cut and rebate package, backed by the majority of Republicans.
The bill lowered the top-bracket individual income tax rate and the corporate tax rate to 6%. It also provided $350 in one-time tax rebates.
This story was originally published March 1, 2022 at 4:00 AM.
