Senate Bill 1021 — Taxing district budgets

Senate Bill 1021 — Taxing district budgets

by
Fred Birnbaum
January 22, 2021

Bill Description: Senate Bill 1021 changes the cap on property tax budget growth.

Rating: +2

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?

SB 1021 updates the method by which taxing districts can determine how much they may increase their property tax levies. It gives them several options to choose from, including the following: changes in the consumer price index; the value of new construction; and  the amount of tax revenue they have forgone revenue in previous years.  The most important provision of this is that regardless of the option the district choses,  the overall increase may not exceed 4%. 

Tax year 2020 was one of only two years on the last 40 in which property tax collections decreased. In 2020, federal money under the CARES Act covered public safety costs in some taxing districts. The other year was 2006, when the sales tax was increased to 6 cents and the maintenance-and-operations school levy was done away with. From 1979 to 2019, property taxes have increased at a compounded annual rate of 5.9%, so this bill, by limiting increases to 4% a year,  is an improvement. 

From 2018 to 2019, the total tax increase for all of the districts in 24 out of 44 Idaho counties was 4% or greater. So the majority of Idaho counties would have seen this cap imposed or been operating at the cap. 

(+1)

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?

Property taxes are a tax on wealth, not a tax on the use of government services. A home with a value of $400,000 does not inherently use more services than a home with a $300,000 value. Asking the family with the high valued home to pay more is a form of wealth redistribution. Capping the increase reduces wealth redistribution because it limits the amount by which a taxing district can extract funds from certain homeowners.

(+1)

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