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Silly you … thinking Idaho law restrains property tax increases

Silly you … thinking Idaho law restrains property tax increases

by
Wayne Hoffman
August 20, 2013

A few weeks ago, a friend called to complain about his rising property tax bill. How is it possible, he asked, that his property taxes are going up 20 percent when state law says property taxes can only go up 3 percent?

The confusion grows worse this month as local governments set their budgets and newspaper articles are rife with reports that our elected officials are triumphantly keeping spending—and taxes—down.

Here’s the truth: There is no limit on how much your own real property taxes can increase. State law says property taxes can only go up 3 percent, but is a bogus non-limiting limitation, and one that applies to local government, not to you. The law says local governments can only raise the property tax portion of their budgets by 3 percent. But annexations and new construction are exempt from that limitation.

Another wrinkle: The law contains a mechanism for “responsible” governments to recapture property tax revenue in later years when they avoid taking the 3 percent they’re entitled to collect. A frugal local government can choose to reject tax increases for, say, two years, raise property tax collections by 3 percent and then collect the other 6 percent to which it was entitled, resulting in a 9 percent increase in property tax collections in a year as a starting point.

Additionally, elected city counselors, school board members and county commissioners will talk glowingly about how they’re lowering the tax levy, (usually followed by a string of exclamation marks, dutifully reported by the media).

What they (the politicians and the press) don’t tell you is levies are a function of property market values and government budgets. That means it is quite possible for the local government to dramatically increase spending and still lower the levy. And that lower levy could still result in a higher tax for you, especially if the county decides that your property has increased in value.

Throughout Idaho, the stories of government spending in a responsible, austere manner are legion; it is no wonder property owners are confused when the tax bill arrives.

The property tax budget in Caldwell has gone up by more than 35 percent since 2006, according to state Tax Commission data on AccountableIdaho.com. Nampa’s property tax budget has risen 46 percent since then. In Boise, it’s about 30 percent; Pocatello, 38 percent; Twin Falls, 37 percent; Idaho Falls, 25 percent; Coeur d’Alene, 41 percent; Post Falls, 27 percent; Lewiston, 20 percent; and Moscow, 38 percent.

Only five of Idaho’s more than 190 cities are collecting less than they were before the recession: Peck, Carey, Glenns Ferry, Malta and Fernan Lake.

And remember, all taxpayers aren’t just subject to a single taxing jurisdiction; every division of government, from the ambulance district to the county to the school is after your buck. Only one county has had a decrease in property tax collections since 2006 (Shoshone County at -17 percent); all other counties have increased from 13 percent (Idaho County) to 97 percent (Teton County).

This is further proof that the state’s property tax system is woefully broken: It lacks predictability, a very basic requirement for good tax policy. Property owners never know what to expect from their tax bill.

Politicians use the existing system to dodge accountability for tax increases and drive up spending. Don’t let them get away with claiming what they’re doing is an exercise in frugality.

Idaho Freedom Foundation
802 W. Bannock Street, Suite 405, Boise, Idaho 83702
p 208.258.2280 | e [email protected]
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