Nampa, Moscow part ways on property tax increases

Wayne Hoffman Articles, Property taxes Leave a Comment

The Tin Ear of the Year award has to, without question, go to the Moscow City Council, for having voted recently to force a massive tax increase on the property owners of that town in the middle of an equally massive debate about how to keep Idaho’s rising property taxes from pricing people out of their homes.  

Moscow officials decided to saddle homeowners, small business people, and other property owners with a 25 percent increase in the state’s most-hated tax to give pay raises to government employees who already receive awesome benefits (See also my last column regarding Idaho’s super costly government retirement program). 

It’s all because  Moscow elected officials decided to undo past years’ decisions not to collect all the property taxes they could. Under Idaho law, local governments have a limit on the annual increase in aggregate property tax collection. When local officials set a budget that doesn’t require the maximum tax collection allowed under law, it doesn’t mean that’s the last anyone will hear of those tax dollars in the future. The uncollected dollar amount is tracked by the state, allowing local officials to call for the money at a later date. That frees local governments to eventually blow past annual property tax increase limits. 

The uncollected taxes are called “foregone taxes” and they’re controversial because they allow local government officials to appear frugal when in reality they’re just banking money for a big tax increase at a later date. 

Holding foregone taxes on the balance sheet and then pulling them from taxpayers’ wallets is a common trick officials use to fund their pet projects. This year, Ada County grabbed some foregone cash to expand its jail and renovate some offices. Last year, Bonneville County pulled more than $700,000 from its foregone balance to fund law enforcement expenses. 

Conversely, if anyone deserves the Taxpayer Hero Award, it’s the Nampa City Council, which did the opposite of Moscow. Nampa officials voted to protect its taxpayers from a similar colossal tax hike in the future. The council did so by not raising property tax collections to the fullest extent that it could under state law and voting separately to forgo collecting a portion of its forgone taxes at any point down the road. It was a smart move that cannot be undone by a future Nampa city council that might decide to get greedy with taxpayers’ money the way Moscow did.  

The law Nampa used to permanently disclaim its forgone taxes was a Freedom Foundation policy solution that state lawmakers adopted a few years ago. Unfortunately, the law has only been used a handful of times, mainly because state associations that represent and give advice to taxing districts are full of big government advocates who fought the law’s passage. These money-grabbers don’t like to tell local officials that the law exists. Over the short time it has been in existence, the law has saved Idaho taxpayers around $1 million. That’s not nothing, but it’s small when considering that about $1.9 billion in property taxes are collected annually. 

If I could make one change to the statute, it would be to reverse the law’s default position, which today automatically lets forgone balances accrue sans any action by local officials, while requiring a governing board to pass a resolution if it wants to protect taxpayers. The default position should be that local governments automatically disclaim collecting forgone property taxes when they don’t tax to the maximum extent, unless they affirmatively vote otherwise. In this way, more taxpayers would be protected from big tax hikes and Idaho voters would see the true intention of all of Idaho’s taxing districts: which ones are serious about keeping property taxes low and which are just building a big runway that allows them to land a giant tax increase in the future.