Despite what Idaho House leaders tell you, local taxes can’t be cut with federal funds
Recently state representatives Scott Bedke, speaker of the Idaho House of Representatives; Megan Blanksma, majority caucus chair; Jason Monks, assistant majority leader; and Mike Moyle, house majority leader contributed a guest opinion to the opinion section of the Idaho Statesman. It was entitled: “Idaho’s local governments can cut your property tax bills right now with federal money.”
Responses to the article from local governments have not been positive, some noting that the article is “misleading at best.” In reality, it endorses the idea that local governments have access to federal funds (American Rescue Plan Act legislation) that could and should be used to lower taxes levied by counties.
It is unfortunate that our state leaders, once again, come to the table ill-advised when making decisions that will ultimately affect all property owners in the state and all Idahoans relying on public services. They promoted tax law changes (House Bill 389) that will continue to have unintended consequences for the quality of service that local governments, by state mandate, must provide.
It is interesting to note that the State Tax Commission was specifically told they were not invited to the party. These are the very people who best understand tax law and how it will ultimately affect the population. HB389 creates a tax shift that, while providing exemptions to the middle class and wealthy, increases the tax on all residential property that is valued at or less than $200,000; this is the group of taxpayers hardest hit by increasing taxes, some of whom are the most vulnerable members of our society. Finally, the attempt to cap taxes collected from new construction also shifts the cost of services for those individuals and businesses to citizens already on the tax roll.
The article explicitly states: “Although the state of Idaho is specifically excluded from using any federal dollars to offset taxes, cities and counties face no such constriction.” Wrong again. Local governments are specifically restricted from using these dollars for direct tax relief purposes. If I may quote from the rebuttal made by Latah County: “Cities, Counties and school districts are not allowed to use ARPA money for already-existing services except in terms of replacing lost revenue, and the funds cannot be used for direct tax relief.”
In summary, all ARPA expenditures must fit within one of these categories:
- Address public health and economic impacts of COVID-19
- Replace lost public sector revenue to maintain public services
- Provide premium pay to essential workers
- Invest in water, sewer, and broadband infrastructure
I do not see property tax listed, but the money is meant to be used to improve the circumstances of disadvantaged groups in the communities who are most likely to be affected by the pandemic, these would include but not be limited to: youth, seniors, those living below the poverty level, minorities and others.
The state continues to mandate services be provided by local government (public defense, and road and bridge repair being two of the costliest) and expect counties and cities to fund those services. That can only be done through property taxes unless the state steps up to help with the cost (these costs can be very high per capita in smaller counties).
The state is currently holding a large surplus of revenue generated from online sales tax which could be used to supplement local funds. They could also take back the cost of funding schools allowing for equalized educational opportunities for students, regardless of where they live. This would take the burden off property owners by decreasing local tax and levying it against all employed members of our communities. While we all agree that rising taxes are an important issue that needs to be addressed, it continues to be a balance between the cost of services and the availability of those services.