Idaho Farm Bureau President Russ Hendricks defends the current property tax system.
Why shouldn’t he?
For him and his clients, it works.
“Is it fair to the commercial property or the agricultural property or the rental property or the non-owner-occupied property that they pay more taxes than they otherwise would, because the homeowners are paying less tax than they would with the homeowner’s exemption?” he asked the Idaho Statesman recently.
Fairness isn’t the word for it — not when, during the past four years, the burden of paying property taxes in Idaho has shifted from the people Hendricks represents toward the homeowners he does not.
Here are a few details courtesy of the Idaho Center for Fiscal Policy: Property taxes in Idaho are regressive. In other words, the less you earn, the more likely you’re spending a greater share of your income on property taxes.
The reason is simple: For most working- and middle-class families, a home represents their largest financial asset. Someone in the top income bracket is more likely to have funds invested in other businesses or equities.
So a family in Idaho’s bottom fifth — defined as earning less than $22,000 — spends about 3 percent of its income on property taxes. Someone in the top 1 percent, defined as earning more than $418,700 — pays 10 times less, or 0.3 percent of his income on property taxes.
A family earning between $22,000 and $37,900 pays 1.5 percent of its income on property taxes while those earning $37,900 to $91,400 devote about 1.4 percent to property taxes.
Supposedly ameliorating that situation is Idaho’s three-legged stool — consisting of a regressive property tax, an even more regressive sales tax and a progressive income tax. But Idaho’s Republican-led Legislature has been cutting back on income taxes for corporations and wealthy individuals, which has triggered even more property taxes in the form of supplemental levies earmarked for local schools.
Simultaneously, lawmakers have authorized local officials to extend tax breaks to industrial development, such as the plant expansion at Clearwater Paper, for up to five years.
Meanwhile, the Homestead Exemption, which is supposed to shield about half the value of a modest home from property taxes, has been allowed to wither. Until four years ago, the tax break was indexed to rise — or fall — with the housing market. But lawmakers capped its maximum benefit at $100,000. That means any house that rises about an assessed $200,000 is paying disproportionately more tax.
With the price of housing in Idaho escalating, the burden is rapidly shifting to homeowners, while people who own commercial or industrial land are paying less.
Likewise, the state’s property tax reduction program, commonly known as the circuit breaker, has languished amid legislative neglect. The circuit breaker is designed to protect the so-called “widow woman” from being taxed out of her home. Low-income seniors and disabled homeowners qualify for the extra help.
Since 2006, however, its maximum benefit has been capped at $1,320, allowing inflation to take its toll. As the Center for Fiscal Policy notes, a circuit breaker benefit once covered 86 percent of the typical recipient’s taxes; now that’s down to 60 percent.
A year ago, assessors across Idaho, including Nez Perce County’s Dan Anderson, proposed doubling the benefit at a cost of about $8 million. To that, the Center for Fiscal Policy would add a more generous eligibility standard. To claim the maximum benefit today, a family can earn no more than $12,250. After that, the tax break trails off until disappearing completely for those who earn more than $30,400.
That’s a paltry sum. The Center for Fiscal Policy cites studies that suggest even in robust health, seniors require an income of $37,000 just to remain economically secure. If they’re not in good health, the threshold rises to $44,712.
But none of that was under consideration when a legislative interim committee on property taxes met earlier this month.
When asked about the circuit breaker or the Homestead Exemption, the panel’s co-chairman, Sen. Jim Rice, R-Caldwell, told Betsy Russell of the Idaho Press: “Sometimes what looks most obvious really won’t solve the problem ... unless you build the basis to solve the other structural issues.”
Translation: Hendricks need not break into a sweat, at least not any time soon. — M.T.