House Bill 389 — Property taxes

House Bill 389 — Property taxes

by
Parrish Miller
May 4, 2021
Parrish Miller
May 4, 2021

Bill Description: House Bill 389 increases homeowner's exemption to $125,000, makes changes to the circuit breaker program, increases the tax exemption for personal property, exempts transient personal property from taxation, and places some minimal limits on the growth of taxing district budgets. 

Rating: 0

Analyst Note: House Bill 389 is a complex bill that combines a number of legislative priorities in a single, last-minute piece of legislation. As might be expected, there are both positive and negative elements to this effort. Ultimately, this bill falls short because it does almost nothing to reduce government spending. Property taxes are the direct result of spending by taxing districts, and this bill does not meaningfully curb these budgets nor does it prevent the formation of new taxing districts. The real and damaging effects of skyrocketing property taxes cannot be effectively addressed without making significant cuts to the spending (and quantity) of taxing districts in Idaho.

Does it increase government redistribution of wealth? Examples include the use of tax policy or other incentives to reward specific interest groups, businesses, politicians, or government employees with special favors or perks; transfer payments; and hiring additional government employees. Conversely, does it decrease government redistribution of wealth?

Perhaps the most notable change made by House Bill 389 is amending Section 63-602G, Idaho Code, to increase the homeowner's exemption from its current maximum of $100,000 to $125,000. Given the rapid rise of home values (perhaps more accurately characterized as the rapid inflation of the U.S. dollar), many Idaho homeowners will benefit from this increase as few homes valued at less than $200,000 remain. 

Nevertheless, this change is not the positive measure it may appear. Increasing the homeowner's exemption does not decrease property taxes overall; instead, it shifts them from homeowners to the owners of commercial real estate and rental property. At a time when rents are already at all-time highs, sharply increasing property taxes inevitably passed on to renters is rather cruel. 

Even homeowners will not enjoy as much relief as they might hope because the removal of taxable value from a taxing district's rolls will cause the tax rates to increase correspondingly unless the taxing district chooses to reduce its spending. 

House Bill 389 amends Section 63-705, Idaho Code, to increase the income threshold for the circuit breaker program and to increase the maximum property tax relief available through the program from $1,320 to $1,500. 

House Bill 389 likewise amends Section 63-705A, Idaho Code, to increase the maximum property tax relief for disable veterans from $1,320 to $1,500.

Property taxes are driven directly by the spending of the various taxing districts empowered to collect them. Increasing the homeowner's exemption and various other targeted property tax relief programs may serve as clever — and even popular — forms of political pandering, but they fail to address the underlying problem of government spending.

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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?

House Bill 389 amends Section 63-802, Idaho Code, to cap the total allowable budget increase for a taxing district at 8% per year, although there are exceptions and the limit does not apply to school districts. It is tragic that this is the best Idaho can do to constrain the outrageous spending increases taxing districts routinely perpetrate against property owners in this state. A cap on budget increases is positive in theory, but to be meaningful, it would need to be much lower, contain no exceptions, and apply to all taxing districts. As written, this bill will do very little, if anything, to protect property owners from skyrocketing confiscatory taxes.

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House Bill 389 amends Section 63-313, Idaho Code, to say, "Beginning January 1, 2022, all transient personal property is exempt from taxation. No replacement moneys shall be provided as a result of this subsection."

"Transient personal property" is defined in Section 63-201(30), Idaho Code, as "personal property, specifically such construction, logging or mining machinery and equipment which is kept, moved, transported, shipped, hauled into or remaining for periods of not less than thirty (30) days, in more than one (1) county in the state during the same year."

No forms of personal property should ever be subject to taxation.

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House Bill 389 amends Section 63-602KK, Idaho Code, to increase the value of personal property exempt from taxation from $100,000 to $250,000. This change will not take effect until January 1, 2022. 

"Personal property" is defined in Section 63-201(19), Idaho Code, as "everything that is the subject of ownership and that is not included within the term 'real property.'"

Personal property should not be subject to taxation. 

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House Bill 389 further amends Section 63-602KK, Idaho Code, to provide that the state will reimburse existing local taxing districts for the personal property exempted from taxation. Taxing districts created before January 1, 2013, are reimbursed up to the full $250,000. Taxing districts created on or after January 1, 2013, and prior to January 1, 2022, are reimbursed up to $150,000 above the $100,000 that was exempted prior to this change. 

Personal property should not be subject to taxation, and taxing districts should not be reimbursed for ceasing to tax something that should never have been taxed in the first place. 

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