GOP and Dems now agree: Time to fix the frozen homeowners exemption | Opinion
There’s a lot to dislike in the Idaho Republican Party’s platform, from utterly goofy ideas about returning to the gold standard and revoking your right to vote in U.S. Senate races, to truly repugnant ones like charging women who obtain abortions with murder.
But one resolution adopted at the recent convention really is an excellent idea: increasing Idaho’s homeowners exemption from $125,000 to $200,000 and indexing it to rise along with home prices.
Idaho’s homeowners exemption allows half of the value of your home to be exempt from property taxes, up to a certain limit that used to fluctuate with home prices. But in 2016, promising more “clarity and predictability,” Republican lawmakers capped the exemption at $100,000. If the aim was to impose clearly predictable continual tax increases, mission accomplished.
The cap has only been raised once, in 2021 to $125,000, a move that amounted to rearranging deck chairs on the Titanic.
The effect is that anyone whose home is worth more than $250,000 — nearly all homeowners in Idaho — has hit the cap. Any time their property value increases, 100% of that additional value is taxable, instead of 50% as was often the case before the cap. This has exacerbated an automatic and ongoing shift of the tax burden from businesses and farms onto homeowners.
There’s a misconception about property taxes that when your home value goes up your tax bill will follow suit. That isn’t necessarily the case.
Your property tax bill goes up for one of two reasons. First, local taxing districts can increase their budgets. Second, your taxable value rises faster than the general rate at which taxable values have risen across the district. This is the key point: Your portion of the total property tax burden is determined by how valuable your property is — but only in terms relative to all the other properties in the tax district, not in terms of its absolute dollar value.
This happens because tax districts don’t directly set a property tax rate. They set a figure for how much revenue they intend to collect. The tax rate is then derived (this often happens after the district has already laid the levy, setting its revenue figure for the year) by dividing that total revenue figure by the total taxable value of all property in the district.
So if everyone’s property values are rising in unison, that has no effect on anyone’s tax bill. But when one group’s taxable value rises much more quickly than others’, they start taking on a larger share of the total tax burden.
And over the last decade, Idaho’s home prices have exploded. Commercial real estate increases have been far more muted. And agricultural property benefits from being assessed solely based on what it can produce, not what it would sell for. All of this has led to a massive shift in the tax burden onto homeowners.
As the Statesman documented in 2020, at the beginning of the 2000s, Ada County’s property tax burden was about evenly split between commercial and residential property owners. Two decades later, homeowners were shouldering almost three-quarters of the burden. Similar conclusions were reached in analyses by the Idaho Capital Sun and BoiseDev
This tax shift is not a force of nature. It’s a policy choice. If there was no cap on the exemption, or if the cap was much higher, that would have significantly blunted the tax burden shift.
If your home’s value goes from $200,000 to $250,000, you’re still fully under the exemption, so your taxable value only goes up by $25,000. If it goes from $250,000 to $300,000, on the other hand, the entire increase is outside the cap, and your taxable value goes up $50,000. If the cap had risen to $150,000, both properties would be treated the same way.
But attempts to do just that have hit a brick wall.
And no one is more responsible for that inaction than House Speaker Mike Moyle. Bills to raise and index the homeowners exemption significantly have been introduced in recent years only for them to get denied a hearing. If Moyle wanted them to move, you can bet they would have.
Increasing the homeowners exemption to $200,000 would provide instant relief to homeowners across Idaho, shifting some of the local tax burden back toward businesses, farms, timber lots and mines.
Eliminating the property tax is a silly pipe dream with no shot of passing. But restoring the homeowners exemption is simple, straightforward and in line with past state policy.
And everyone seems to agree it’s a good idea, so why hasn’t it happened? Democrats opposed the cap to begin with and have long fought to fix it. Now the Idaho GOP is officially on the same page.
So next legislative session, the question is simple: Is Moyle going to be the last man standing between every Idaho homeowner and a big property tax break?
Bryan Clark is an opinion writer for the Idaho Statesman.