New Study: What it would take to eliminate Idaho's local property taxes
Eliminating Idaho’s property tax may sound simple, but a new Mountain States Policy Center study finds replacing the roughly $2.2 billion the tax generates for local governments would involve significant tradeoffs for taxpayers and communities.
The new study, “The challenges — and price — of eliminating Idaho’s local property taxes,” examines what it would take to replace property taxes with sales taxes and finds dramatically different results depending on where Idahoans live.
Using Idaho property-tax collections and U.S. Census Bureau retail-sales data, the study estimates that replacing property taxes statewide through the retail-sales base would require an additional sales tax of approximately 5.4%. Combined with Idaho’s existing 6% state sales tax, the total rate would be approximately 11.4%.
“The frustration with property taxes is understandable, especially for homeowners who have paid off their mortgage but continue receiving a tax bill every year,” said Chris Cargill, President of Mountain States Policy Center and author of the study. “But eliminating a tax is only half a policy. The other half is figuring out what replaces the revenue.”
The study finds a statewide, one-size-fits-all solution would be especially difficult because Idaho counties have vastly different property values and retail economies. The estimated local sales-tax rate necessary to replace existing property taxes ranges from 2.4% in Shoshone County and 2.8% in Bonneville County to 14.7% in Valley County, 21.2% in Power County and more than 30% in Boise County.
The study examines three potential approaches: having the state collect replacement revenue and distribute it to local governments; allowing communities to choose whether to replace some or all property taxes with local sales taxes; or requiring communities statewide to transition from property taxes to sales taxes. chris property taxes
The analysis finds that a statewide takeover could shift substantial fiscal authority from local communities to Boise, while a mandatory sales-tax replacement could produce manageable rates in some counties and extraordinarily high rates in others. chris property taxes
Instead, the study identifies local choice as a possible path for communities where the numbers work. Under such an approach, any new local sales tax would have to directly replace property taxes rather than simply being added on top of them, voters would have the final say, and lawmakers could establish limits to prevent excessive local sales-tax rates.
The study also highlights other potential reforms, including stronger spending restraint and Truth in Taxation, which would require greater transparency when local governments seek additional property-tax revenue.
“There is no painless tax swap,” Cargill said. “Idahoans can absolutely have a serious conversation about dramatically reducing or even eliminating property taxes. But taxpayers deserve to know the full price of the replacement before making that choice.”
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