Bill Description: House Bill 886 would impose a state property tax that, together with its exemptions, would primarily target residential property owned by non-Idaho residents and residential property owned by Idaho residents used as short-term rentals.

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Does it increase barriers to entry into the market? Examples include occupational licensure, the minimum wage, and restrictions on home businesses. Conversely, does it remove barriers to entry into the market?

House Bill 886 starts with a lengthy section containing “legislative findings and intent,” which assert a number of claims that run counter to economic facts. The first such claim is that “the rapid proliferation of non-primary residential properties and high-occupancy short-term rentals has placed an unprecedented and disproportionate strain on Idaho's public safety infrastructure.”

Another subsection claims that “the conversion of residential neighborhoods into high-turnover investment properties places unique stress on local road networks, water systems, and sewer facilities originally engineered for lower-intensity use.”

Owners of non-primary residential properties already pay higher property taxes than most owner-occupants who qualify for the homeowners' exemption. Moreover, there is no inherent reason why renters (either short- or long-term) would impose greater demand on infrastructure than a similarly sized family living there on a more permanent basis. The need for police, fire, and EMS services, and the use of roads, water, and sewer systems, are proportionate to the number of people occupying a residence, not how long the same people are in the same place. The frequency of turnover does not meaningfully change this demand. 

The intent language and the provisions of the bill make it clear that the intent is to disincentivize and financially penalize voluntary market activity related to the use of private property. 

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Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?

The bill would repeal Section 63-216, Idaho Code, which is a 30-year-old law that says, “In any period during which a sales tax is in force in this state, there shall be no levy of the general state property tax permitted in section 9, article VII, of the constitution of the state of Idaho.”

Repealing this protection would open the door to the imposition of new taxes. 

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The bill would amend Section 63-801, Idaho Code, to impose “a state property tax on real and personal property not otherwise exempted by section 63-602PP, Idaho Code,” of “two and one-half (2.5) mills on each dollar of the taxable value of all real and personal property subject to such tax.”

Once accounting for exemptions, the bill’s fiscal note estimates that this tax would expropriate an additional $160 million for government use. 

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Does it increase government spending (for objectionable purposes) or debt? Conversely, does it decrease government spending or debt?

The bill would create a “state property tax fund” in the state treasury and decree that 50% of the money collected under this new taxing scheme would be allocated to fund “law enforcement services, fire protection services, and emergency medical services.”

Another 30% would be allocated to “providing a direct credit against the property taxes due for homeowners receiving the homestead exemption.”

The remaining 20% would be allocated to funding “infrastructure, capital expenditures, and maintenance costs” related to “roads, water, sewer, fire protection, ambulance, and public safety.”

These massive tax increases would NOT be included in the amount of property tax revenues to finance an annual budget for the purposes of sections 63-802 and 63-803, Idaho Code, and would NOT be used in computing the limitations on increases in property tax revenues provided in section 63-802, Idaho Code.

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Does it violate the principle of equal protection under the law? Examples include laws that discriminate or differentiate based on age, gender, or religion or which apply laws, regulations, rules, or penalties differently based on such characteristics. Conversely, does it restore or protect the principle of equal protection under the law?

The bill would create Section 63-602PP, Idaho Code, to list the exemptions from state property tax, which would render it intentionally redistributive, designed to financially penalize non-Idaho residents who own residential property and Idaho residents who use their residential property for short-term rentals.

The bill would exempt “personal property; operating property; forest land as defined in section 63-1701, Idaho Code; property primarily devoted to the exploration, development, or extraction of any mineral as that term is defined in chapter 7, title 47, Idaho Code, and any mining claims whether patented or unpatented; property that qualifies for the exemption provided in section 63-602G, Idaho Code;” and “real property classified as commercial property, industrial property, or land actively devoted to agriculture.”

It would also exempt “any additional residential property owned by a natural person who is a resident of the state of Idaho and who has been granted a homestead exemption pursuant to section 63-602G, Idaho Code, for a primary residence within the state.” But, “this exemption shall not apply to any property utilized as a short-term rental for more than thirty (30) days in a calendar year, unless said short-term rental has a maximum occupancy level of six (6) or fewer individuals.”

Finally, it would exempt “residential property that is not a primary homestead but is occupied by a tenant under a long-term lease of at least seven (7) months and is not subleased by such tenant.”

It is clear, both from the intent language and the exemption list, that this bill is proposing a massive punitive tax to target specific property owners for using their property in the manner that is most responsive to market demand. 

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Does it violate the spirit or the letter of either the United States Constitution or the Idaho Constitution? Examples include restrictions on speech, public assembly, the press, privacy, private property, or firearms. Conversely, does it restore or uphold the protections guaranteed in the US Constitution or the Idaho Constitution?

Section 2, Article VII of the Constitution of the State of Idaho says, in part, “The legislature shall provide such revenue as may be needful, by levying a tax by valuation, so that every person or corporation shall pay a tax in proportion to the value of his, her, or its property, except as in this article hereinafter otherwise provided.”

The bill says, “In accordance with Section 2, Article VII of the Constitution of the State of Idaho, the Legislature hereby declares that this state property tax is needful to ensure the long-term viability of Idaho's physical infrastructure.”

But this declaration is based on dubious economic assertions, driven by the preferences of central planners rather than by legitimate economic needs. 

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