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Idaho property tax relief is waiting on a solution

Updated: Jul 21, 2023

Idaho residents are experiencing a painful consequence of rising real estate values. Not only is it more difficult to purchase a home and/or relocate, but property taxes are also increasing. From 2020 to 2021, there was a 20.2% increase in the assessed value of Idaho property, totaling $230.7 billion. Then from 2021 to 2022, assessed values increased by 43.7% to reach $332.1 billion.

To put this in perspective, in the last market run-up from 2005-2006 before the Great Recession, Idaho only experienced a 19.8% increase in assessed property values. Despite lowering levy rates throughout Idaho’s local governments, the property tax amount paid by each homeowner has increased substantially.

The Idaho State Tax Commission recently presented to the Idaho House of Representatives Committee on Revenue and Taxation. One chart shows that, of the major property categories in Idaho, residential properties have increased more than the other property categories which include commercial, public utilities, agriculture, timber, and mining.

The thousands of dollars that individual Idaho families are having to divert to ballooning property taxes is a difficult burden in this inflation-driven economy. Kathy Ireland, with the Idaho State Tax Commission, shared with the Committee on Revenue and Taxation, that in 2021-2022 residential property owners (excluding new builds because they have an inherent premium) saw a 9.3% increase in taxes. Commercial property owners had a 13.5% decrease in property taxes over the same time-period.

Property tax relief has been built into Idaho’s property tax system for decades. Beginning in 1980, homeowners received a property tax exemption up to 50% of the value of their home, originally capped at $10,000. This exemption was deducted from the assessed value of the home, while the remainder was then the taxable value of the property. In 2006, Idaho began to rely upon the Federal Housing Price Index to set the exemption amount for property taxes and this number fluctuated with the housing market. In 2016, the Idaho legislature voted to cap the property tax exemption at $100,000 (which later increased to $125,000).

If a homeowner’s property is greater than $250,000, the homeowner’s exemption will be maxed out. At the end of 2022, the average Idaho home cost was $459,947.

Unfortunately for homeowners, assessed housing values increased dramatically post-2016 and the majority of the tax burden quickly shifted onto residential property and away from commercial. Canyon County estimates that 75% of its property tax income comes from residential property.

A proposal to re-instate the HPI in last year’s legislative session had 40 sponsors but was never heard in committee. If the HPI was re-instated, it would have increased the exemption to almost $180,000 in 2022. This would have saved the average urban household roughly $573.65 in 2022. (180,000 minus 125,000 equals 55,000. This was multiplied by the average urban property tax levy rate across Idaho of 1.043%.)

Governor Little has also called for property tax relief, but has left it to lawmakers for a specific strategy. He called for the setting aside $120 million from the general fund to buffer local property tax needs, while the legislature develops a longer lasting solution.

Providing funding to our cities, schools, counties, roads, and other municipal services is critical to the daily functions of both homeowners and businesses, but the cost should not be borne by only one of type of property owner.

Not only do local governments need to keep spending in check, the Idaho Legislature needs to find and hear out a workable proposal that fairly distributes the property tax burden. Hopefully, as the Legislature begins its fourth week of the legislative session, workable proposals will find a path forward to fix Idaho’s property tax system.

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