Though Idaho doesn't have a statewide property tax, taxpayers would have a better understanding of their local property tax burden under a new legislative proposal introduced today. Sponsored by Rep. Cannon, the Chair of the House Revenue and Taxation Committee, HB 369 would bring Truth in Taxation to Idaho. This important property tax transparency tool has been used by Utah for decades and would be a helpful reform for Idaho to adopt as well.
According to the Statement of Purpose for HB 369:
"This 'Truth in Taxation' legislation would require a local taxing district to publish in the newspaper and to send to owners of property located within said taxing district a Notice of Proposed Tax Increase, containing specified information aimed at making the act of raising taxes and the process of raising taxes more transparent."
Property taxes are an important part of the tax base for school districts, local governments, and many states. Though based on a relatively straightforward calculation, they are among the least understood taxes by taxpayers. Although there are variations in each state, the general formula for property taxes is the value of the property multiplied by the tax rate.
Too often taxpayers focus on assessed values instead of the spending decisions made by government officials when considering their property tax burden.
First, taxpayers need to know that assessments are just a part of the calculation. The main driver of property taxes is spending increases approved by policymakers and voters themselves through levies. The assessor is not responsible for any property tax increase, the local budget writers are.
This is why efforts to restrict property assessments are often misplaced and lead to other problems. The better way to control property tax increases is on the spending side and/or with levy restrictions. One way to help bring greater transparency to the fact that spending is the main cause of property tax increases is with a reform called 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 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.”
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.
Here is an example of the Utah Truth in Taxation postcard that is sent to taxpayers:
There was some discussion when Idaho's HB 369 was introduced that a Truth in Taxation postcard may not provide enough context for why the property tax increase is being proposed. To address that concern, a QR code could be added to the postcard that would take taxpayers to a landing page on the taxing district's website with additional explanatory details.
As we noted in our Policy Manual, even though Idaho doesn’t have a statewide property tax
and the legislature recently enacted property tax rebates to help with the local tax burden, Truth in Taxation is still needed to help empower taxpayers to better engage and understand their local property tax burden and the connection to spending decisions.