[Vision2020] Advisory vote

[Shirley Ringo]

ADVISORY VOTE ON PROPERTY TAX

 

            In the August special session, the majority of Idaho legislators approved a tax shift.  The 0.3% property tax assessment for support of public school maintenance and operations was dropped.   In an attempt to replace the revenue lost, the sales tax has been raised from 5% to 6%.

 

On November 7 YOU will be asked to weigh in on this issue.  As your representative, I have studied it closely. 

 


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      "Should the State of Idaho keep the property tax relief adopted in August 2006, reducing property taxes by approximately $260 million and protecting funding for public schools by keeping the sales tax at 6%?".
     
       
     

 

The wording encourages you to say "of course!"  But read on - there's more to the story.

 

Tax issues are very complex.  A good visual image involves picturing a balloon - when squeezed in one area, another part bulges.  The maneuver adopted by legislators in August is a tax shift.  It provides no additional support for education.

 

How are tax payers affected by this shift?  Economists know there are winners and losers.  Some citizens will see a net tax increase - the affect of the increased sales tax will be greater than the decrease in property taxes.  In general, individuals in middle to lower income classes will be losers.

 

Facts to be considered:

 

Home renters constitute 22% of Idaho households.  They will pay about $10 million more sales tax, with little or no offsetting income or property tax relief.

 

Other groups who will tend to be losers include low income seniors and residents of rural communities.   Those who pay more are often the least able to bear it.

 

This is a concept that has been tried.  It did not work.  In 1996, legislators shifted $40 million of school support from property tax to sales tax.  The amount required for property tax replacement grew each year. It was eventually capped because of the effect on the state general fund.

 

Because of the complexities of the property tax, higher assessments do not necessarily translate to higher taxes.  Generally, tax rates may decline when there are valuation increases. 

 

The additional $260 million state obligation causes k-12 and Higher Education to compete with Health and Welfare and Corrections for state budget money.

 

The tax savings advertised is overrated.  The amount reported, $50 million, does not consider the federal and state income tax effect for those who itemize.  They will claim lower property tax deductions.

 

Part of the legislation passed in the special session puts $100 million in a public school "rainy day" fund.  Supposedly, this will protect education during economic downturns.  We can be assured those downturns will occur.  Economists from our three major universities expect this.  In the downturn of 2002, the state emptied all stashes of money available.  Even that didn't stop holdbacks, where schools and other agencies lost important state support.

 

Most of the money from this tax shift does not go to relief for homeowners property taxes.  Primary homeowners received only 40% of the property tax relief provided through this shift.  60% of the property tax relief, about $156

million, goes to groups such as industry, speculators, utility companies, and second homeowner investors.  

 

 

It is important that our system of taxation be fair and that it provide adequate revenue for important programs.  Idaho needs to work on both of these issues.  There are millions of dollars of tax exemptions and exceptions that have been given special interests over the years.  These should be evaluated, and many should be eliminated.

 

It is doubtful that this tax shift helps with fairness.  Middle class families will be picking up the tab for breaks given to Micron, Avista Power, Simplot, and some of the states biggest developers.  We should study the magnitude of breaks already in place for these groups before enacting a tax policy that gives them even more.

 

We need to address property tax issues, and other aspects of taxation.  There were attempts to introduce a variety of ideas during the 2006 legislative session and during the special session.  Republican leaders seized upon this particular tax shift and showed no curiosity about anything else.

 

When a legislative committee held a public meeting in Moscow last summer, the vast majority of those attending were more concerned about funding for education than property tax changes.  Last summer, when your legislators from Latah County held a community meeting to hear opinions of voters, the message was consistent.  The concern was for funding education and other programs rather than property tax relief.

 

Senator Gary Schroeder, Representative Tom Trail, and I opposed the tax shift during the 2006 legislative session, and during the special session.  We were in agreement that it was not the best solution for Latah County.  Of those who contacted us on the issue, the majority asked that we oppose it.

 

A study of Idaho tax laws, and thoughtful modifications, should be a top priority.   Please vote NO on the advisory vote.  Tell Idaho legislators you want a better system - one that is fair and adequate.  (The Legislature is not obliged to act upon the advisory vote, but this is an opportunity to send a message.)
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