Get rid of the property tax — or at least make changes to lower the burden

Wayne Hoffman Articles, Property taxes Leave a Comment

If the living embodiments of the property tax and the income tax were dangling from the edge of a cliff and I had to save one, my sweaty hand wouldn’t hesitate to release its grip and allow the property tax to fall to its grisly death in the policy abyss below. 

The income tax is the government’s way of stealing a person’s productivity, an absolutely abhorrent practice. 

However, the property tax is a special kind of hell. 

The property tax endlessly siphons money from a property owner. It doesn’t matter that the property may be paid for, or that the owners are no longer earning the money needed to pay the taxes. The latter is what’s known as “being taxed out of your home.” Property taxes go up while a person’s means to pay the tax bill goes down. It’s a real problem here in Idaho. 

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The property tax eviscerates the concept of private property ownership: Everyone is but a trespasser on what is essentially land rented from the government; you have to pay to stay, to maintain any semblance of ownership. As such, no land is truly ever “yours” even if you “own” the property outright. Your taxes can go up just because of something outside of your control — government spending, the demand for homes by out-of-staters, a development nearby that causes your property values to go through the roof, as examples. 

Some have advocated increasing the homeowner’s exemption to help property owners mitigate the tax increases. But this would only shift property taxes to non-owner occupied properties, including businesses and apartments. Further, if the $100,000 homeowner’s exemption is increased, it won’t help rural homeowners with property valuations under $200,000. Others have advocated passing a law like California’s Proposition 13. But this, too, would only help certain taxpayers at the expense of others. In this case, incumbent property owners benefit while new property owners, including young families, are stuck with huge bills. Proposition 13’s uneven design would likely also violate Idaho’s Constitution, which requires taxes to be uniform.  

If Idaho were to eliminate the property tax, it would be the only state in the country that respected the right to property ownership so much that it didn’t tax the owners of real property. That’s a bold step. But lawmakers and Gov. Brad Little could take smaller, but still meaningful steps to ameliorate the property tax burden. 

The state can consolidate the more than 1,000 taxing districts in the state, so that a single property owner doesn’t find himself subject to a multitude of taxing districts — so many that a given district evades any real accountability for the levies it sets. The state could also consolidate the number of property tax increase elections, which would cut down serial do-over elections that local governments use until voters acquiesce to the government’s demand for more money.

Further, Idaho legislators could fix the state’s “forgone balance” rules. If you’re not sure what a forgone balance is, check out some of my previous articles on the topic. Basically, a forgone balance allows tax entities to collect property taxes they could have assessed earlier but didn’t. To make it even a tiny bit harder to collect these taxes would protect taxpayers from facing the sudden shock of many years of retroactive tax harvesting.

The state could eliminate certain tax levies, like the “charity levy” that funds county indigent programs. It could eliminate or restrict urban renewal districts that drive up property taxes. Officials could eliminate special tax deals that allow select businesses to pay no property taxes, which simply shifts costs to everyone else. 

Keep in mind that a portion of sales tax collections are distributed to counties and cities — and those shared revenues have been growing annually at nearly six percent for many years. The state could require that any windfall sales tax collections be used to reduce property taxes instead of being used to expand government. By redirecting sales tax dollars to property tax reduction, local governments would likely have to curtail their spending and prioritize tax relief.I believe eliminating the property tax is an idea whose time has come. But even if others don’t believe as I do, hopefully state officials will agree that they have numerous options to pass the reforms needed to reduce property taxes so private property remains affordable for everyone.