The proposed tax cuts keep coming in Idaho. First, we saw the introduction of one of the largest income tax cuts in state history. Then there was the proposal to increase the state’s grocery tax credit. Now comes HB 74 to use state funds to provide local property tax relief. Combined these proposals are estimated to provide $400 million in tax relief. While property tax relief is needed in Idaho, it is a tricky nut to crack with no statewide property tax levy and local spending driving the burden.
Here is the statement of purpose for HB 74:
“This legislation provides an additional $100 million of property tax relief to Idahoans. $50 million of property tax relief will be provided through the School Facilities Fund as established in HB 292 of the 2023 legislative session. An additional $50 million in property tax relief will be provided in the homeowner property tax relief account that was also established in HB 292 of the 2023 legislative session.”
According to the Idaho State Tax Commission:
“There’s no legal limit to how much any property’s tax bill can increase or decrease. But each taxing district can raise the property tax portion of its budget by no more than 3% unless one or both of these apply:
Voters approve an increase to property tax revenue (e.g., bonds, overrides)
Your taxing districts apply new construction or new annexations”
This means that even with the property tax relief proposed by HB 74, if local spending increases, so too will property taxes. Idaho’s property tax burden is budget-driven at the local level. There is no statewide property tax for lawmakers to reduce. With this in mind, the next step for property tax relief should be a focus on spending increases at the local level.
One idea to help with this is Truth in Taxation. To bring more transparency to property tax increases, Utah was the first to adopt Truth in Taxation in 1985. Along with Utah, Truth in Taxation currently exists in Iowa, Kansas, Nebraska, and Tennessee. Here is how the Utah Legislature describes the property tax transparency process:
“The basic concept of the system is that taxing entities may only budget the same amount of property tax each year, unless they have ‘new growth’ (not just change in value on existing properties) or go through a very public process of notifying the public and holding a public hearing on the proposed revenue increase. To achieve this, as taxable values change, the tax rate automatically adjusts to provide a constant amount of revenue. When values increase, the tax rate adjusts down to provide the taxing entity the same amount of revenue as it received in the prior year. When values decrease, the tax rate adjusts up to provide the same amount of revenue.”
Utah’s Property Tax Division further explains:
“Property Tax increases require a Truth in Taxation process of public disclosure. Taxing entities are required to follow a series of date specific steps, including notification to the county, newspaper advertisements, parcel specific notices, and a public hearing, before adopting a property tax rate above a calculated certified tax rate. The timeline is different for a fiscal year taxing entity (budget cycle July 1 to June 30) and a calendar year entity (budget cycle Jan 1 to Dec 31).”
Before moving forward with property tax increases, government officials in Utah need to first fill out a “Tax Increase Checklist” and comply with the “Tax Increase Requirements” details under Truth in Taxation.
The good news is that Rep. Cannon is exploring ways to bring Truth in Taxation to Idaho’s local property taxes. For taxpayers, the cash back in their pocket proposed by HB 74 is a good thing. The challenge is how to move forward with future property tax relief that doesn’t rely on state taxpayers subsiding local spending increases. Truth in Taxation could be just what the doctor ordered for Idaho to keep the property tax burden in check.