[Vision2020] Property tax cut?

[Ralph Nielsen]

ELLIOT WERK

IDAHO STATE SENATE
Legislative News
The “Special Interest” Session
July 16,  
2006                                                                     
                                      Volume 1, Number 6


In This Issue
·    The “Special Interest” Session – What’s in it For You?

·    Town Hall Meeting on the Property Tax Plans – July 24th, 6:30 PM  
at Boise Public Library

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The “Special Interest” Session – What’s in it For You?
By now many of you have heard talk of a special session of the  
legislature to provide a property tax cut. The Governor has asked  
legislators to hold Friday, August 25, 2006 open in case a special  
session is called.

Homeowners are rightfully asking for something to be done about  
rapidly escalating property taxes. So, if a special session of the  
legislature is called - what’s in it for you – the homeowner?

To answer that question let’s take a look at the tax cut proposal  
that the Governor has laid out (both in his inaugural speech and many  
times since). Then we can talk a bit about how the proposal affects  
homeowners, and then about how the special session will work. Lastly  
I will lay out the recently announced Democratic plan that provides  
100% of the property tax relief to homeowners without raising the  
sales tax.

The Governor’s Proposal - The proposal removes the school property  
tax levy (known as the M&O - $3 per $1,000 of property value) from  
all types of properties and shifts that cost (about $250 million) to  
the sales tax. This would result in a reduction of about 20% in  
property taxes for all classes of properties.

That sounds pretty good. Until you look at the details.

This proposal was rejected three times by the Senate in the last  
legislative session because it penalizes the people that are asking  
for the tax cut – the homeowners - while substantially weakening  
education funding. There is no tax relief for homeowners in this  
plan, just the mirage of relief.

Let me explain.

How the Proposal Affects Homeowners - Property taxes are calculated  
differently for residential property compared to all other types of  
property. While residential property taxes are based on full market  
value (what we can sell our house for on the market) other types of  
property (commercial, industrial, utility, and agricultural) are  
assessed based on income potential. This has led to a dramatic  
difference in property value increases over the last five years  
(really forever).

For instance, while agricultural land and utility property taxes have  
actually dropped almost 10% in the last five years, residential  
property taxes have increased by almost 92%.

So back to the Governor’s plan – according to Idaho Tax Commission  
figures - removing the M&O from all classes of property gives 60% or  
about $150 million of the tax cut to properties other than owner  
occupied homes (like your home that qualifies for the homeowner  
exemption). That leaves 40% of the cut for you and me.

So lets recap, properties that have remained relatively flat or even  
seen a decrease in their property taxes in the last five years will  
get 60% of the tax cut while properties that have seen a 92% increase  
in property taxes get 40%. Seems a bit…unfair.

And it gets even worse. We, the homeowners, pick up the lions share  
of that $250 million cost since the proposal shifts the school levy  
from property to sales taxes and business is generally exempt from  
paying sales tax (remember all those tax exemptions). If business  
properties are paying part of the school levy today and we shift to a  
tax that they do not pay (and the costs stay the same) then  
homeowners pick up that extra burden. That is how a tax cut becomes a  
tax increase for you – the homeowner.

Another recap – 60% of the tax cuts go to special interests that have  
seen no substantial property tax increases over the last five years  
and homeowners see an overall increase in our tax burden as we pick  
up the full cost for school funding.

But that is not all. Unfortunately there’s more.

If you itemize deductions on your federal income taxes you can deduct  
your property taxes from your income. So in reality you pay your  
property taxes with 75 or 80 cent dollars (depending on your tax  
bracket). So not only will homeowners pay for a tax cut for special  
interests, but you also lose the deductibility of that portion of  
your tax burden!

That is why the Senate rejected this plan three times during the  
regular session – it raises taxes on the people that need the cuts  
the most – the homeowners. And it gives a juicy tax cut to property  
classes that have not seen substantial property tax increases!

If you don’t believe me you can ask Senator Hal Bunderson – chairman  
of the Senate Local Government and Taxation committee (you can  
contact him at 888-7156). After weeks of study using Idaho Tax  
Commission figures he led the charge against this plan in the regular  
session and has spoken out repeatedly against it recently in the  
Idaho Statesman.

That is why I call the contemplated special legislative session a  
“Special Interest” session. It will provide tax relief only to the  
special interests – not the homeowner.

How Will the “Special Interest” Session Work? – As the Governor has  
laid it out, a proposal will be worked out behind closed doors. The  
Governor will line up support for the plan prior to calling the  
“Special Interest” session - guaranteeing that he has enough votes to  
assure a quick victory. The “Special Interest” session will be called  
on a Friday (August 25th) where the only proposal considered will be  
his plan. There will be no committee hearings, no public testimony,  
and no other plans considered.

The Democratic Plan – Property taxes on owner occupied homes have  
increased an average of 92% in the last five years. You need some  
relief. Our plan provides homeowners with 100% of the relief.


The plan is simple – everyone that qualifies for the homeowner  
exemption is given an additional exemption from the school M&O levy.  
You get a 20% property tax cut and special interests get nothing. No  
shift, no complications. Just tax cuts where they are needed.

The cost of our plan is $104 million which can be absorbed by our  
ongoing surplus (we currently have a $200 million fund balance – of  
that about $100 million is likely ongoing revenue we can use to fund  
property tax relief).

Town Hall Meeting on the Property Tax Plans

The Ada County Democratic legislators will host a Town Hall Meeting  
at 6:30 PM on Monday, July 24th at the Boise Public Library. The  
purpose of the meeting is to have a public review of both property  
tax plans and provide the opportunity for the public to discuss and  
comment on the plans.

We are offering this opportunity to ensure that the public is well  
informed about the property tax plans and the ramifications of each  
plan.

I hope to see you all there. You might want to arrive early since  
space is limited and we expect a large crowd.

In closing I would ask you to contact your legislators to voice your  
opinion about property tax relief. Do you want to pay for a cut for  
the special interests or would you like targeted relief for  
homeowners. You can contact your legislator by name at http:// 
www.legislature.idaho.gov/about/contactbyname.cfm or by district at  
http://www.legislature.idaho.gov/about/contactbydistrict.cfm. You can  
also contact the Governor (after all he is leading the charge) at  
either 334-2100 or via email at http://gov.idaho.gov/ourgov/ 
contact.html.