Idaho homeowners want property tax relief. Sorry, commercial and ag come first

Editor’s note: This editorial has been updated with a more recent figure on the current value of a homeowners exemption.

A bill in the Senate by Sen. Jim Rice, R-Caldwell, changes the formula for growth of property tax budgets, essentially setting a lower cap on how much cities and counties can collect from property taxes.

Notably, it allows cities and counties to collect a lower amount, 75%, on new construction, which flies in the face of the notion of growth paying for itself.

As expected, local officials have presented a united front in strong opposition.

We don’t think Rice’s bill would be the end-of-the-world, sky-is-falling scenario that some city officials are making it out to be. At the same time, it probably would do more harm than good by cutting into municipal services.

Further, even though Rice’s statement of purpose indicates otherwise, his bill won’t solve the problem in fast-growing Idaho of rising property taxes. That’s because even if budgets were flat, if residential property values continue to increase more quickly than commercial and agricultural property values, then residential property owners will pay an even bigger slice of the tax pie compared to business and ag.

It’s been happening the past few years.

Residential property taxes have been rising dramatically since 2016, while commercial property taxes have been flat or have even fallen — yes, fallen, particularly in Ada County, where residential property values have skyrocketed.

This has meant that residential taxes have taken up a bigger and bigger share of property tax revenues. The Ada County property tax burden went from 60% residential and 40% commercial in 2011 to 72% residential and 28% commercial in 2019. That’s unfair and out of balance.

The No. 1 thing that legislators can do to provide property tax relief is to raise and index the homeowners exemption, currently capped at $100,000, a decision legislators made in 2016. If the exemption had continued to be tied to inflation, then it would have been worth $135,850 last year, according to the Idaho State Tax Commission. This year, it would have been worth $149,525.

Knocking another $50,000 off taxable value is a no-brainer solution to reducing residential property taxes.

So why don’t legislators do it?

Rep. Mike Moyle, R-Star, is absolutely correct when he says that reducing the taxable value of residential property would just shift the tax burden elsewhere — to commercial and agricultural properties.

As Kate Talerico of the Idaho Statesman reported last year, business, real estate and agricultural interests played a big part in lobbying for the cap on the homeowners exemption.

They got their wish. Commercial property taxes have actually declined, while homeowners see their bills shoot up.

Moyle also assails a rise in the homeowners exemption on the grounds that in places like Star, there isn’t a lot of commercial property that could handle the tax-burden shift. Therefore, the only way to reduce property taxes is to limit the budgets of cities and counties.

But this argument is disingenuous. The budget for the city of Star makes up only 12.9% of a tax bill there. West Ada School District, which includes plenty of commercial property, makes up 24.6% of the property tax bill in Star. Ada County, which also contains billions of dollars in commercial property value, makes up 22% of the tax bill. Similarly, College of Western Idaho, the mosquito abatement district and others on a Star property tax bill have a diversified property tax base to which residential property taxes could be shifted.

We haven’t even mentioned other good relief measures, such as allowing school districts to collect impact fees for new schools and making the circuit breaker automatic for eligible taxpayers.

For now, it’s way past time for commercial and agricultural properties to participate in and share the property tax increases that homeowners have had to endure since the exemption was capped in 2016.

Raise the homeowners exemption for residential property tax relief immediately.

This story was originally published March 5, 2021 at 4:00 AM.