BOISE — Idaho lawmakers passed a $382.9 million income tax cut and a billion-dollar transportation bonding plan Monday, sending both to the governor’s desk, while also introducing a controversial new property tax bill packed with proposals from a 25% increase in the homeowner’s exemption to new tax breaks for developers and large businesses.
The moves came amid a marathon of lawmaking in both the House and Senate that saw the House stay in session until after 8 p.m. and the Senate pass nearly 20 bills, including HB 380, the big, House-passed income tax cut bill, and HB 362, the transportation bonding bill.
Other long-awaited moves Monday included House passage of the higher education budget, on a 49-20 vote, sending the measure to the Senate; and House passage of several major pieces of the public schools budget, including the budget for the teachers division, which it had previous rejected but which passed unanimously on Monday.
House Majority Leader Mike Moyle, R-Star, who sponsored the new property tax bill, HB 389, said he’s hoping lawmakers can wrap up their session on Tuesday and recess.
“I want to be finished,” he said. “We can come back after a week and look at whatever the governor does.”
However, Moyle said he wasn’t sure if his new property tax proposal would pass the Senate — or even the House.
Moyle said the bill, which was both introduced and passed out of committee in a matter of just a few hours, is a conglomeration of a whole lot of other bills, from the Senate-killed SB 1108 to limit local government budget growth to Rep. Bruce Skaug’s never-introduced homeowners exemption bill to several others, but it’s got lots of other things in it, too. Moyle said the bill was assembled “with the help of the counties, Farm Bureau, Association of Realtors” and others.
The giant bill would raise the homeowner’s exemption from its current cap of $100,000 to $125,000, while also authorizing each taxing district to reduce its new construction roll by the amount of homeowner’s exemptions above $100,000 in its district.
It would increase the Circuit Breaker property tax break for needy seniors to a maximum of $1,500; it’s currently capped at $1,320 and hasn’t been adjusted for inflation since 2006. It would also boot needy seniors off the circuit-breaker program “on and after Jan. 1, 2022,” if their current year’s assessed value exceeds 125% of the county’s median, and instead they’d be “referred to the property tax deferral program” that lawmakers already passed and that has been signed into law; that allows seniors with income up to $50,000 to have the state pick up all their property taxes through a government-sponsored reverse mortgage, with the state getting paid back with interest when the homeowner dies or sells the home.
Moyle said that’s to target needy seniors with “million-dollar homes” who get the Circuit Breaker property tax break.
It would limit local government budgets to reflect just 90% of the value of new construction and annexation within the taxing district each year, rather than 100% as under current law; and would restrict local government budgets from reflecting increases from expiring urban renewal districts to just 80% of the amount that goes back on the tax rolls, rather than the current 100%.
It would also place a cap on local government property tax budget growth of 8%, including everything. Moyle said, “That will affect a few, but not many, districts.”
The bill also would limit and cap local governments’ use of “forgone” property tax revenue; under current law, when local governments don’t take the full allowable 3% increase in their property tax budgets, they can essentially reserve the option to increase their budgets by that forgone amount in future years.
It would extend the current tax exemption for site improvements on land held by a developer from the point where the property development is begun to the point at which it’s completed, creating a significant new property tax break for developers.
It would increase the exemption for businesses for personal property, which includes business inventory, machinery and equipment, from the current $100,000 per county to $250,000, a major tax break for the state’s largest businesses, and fully exempt all personal property defined as “transient personal property,” starting Jan. 1, 2022.
An existing tax exemption for “operating property,” such as utility lines and rail cars, also would rise from the current $100,000 cap per county to $250,000.
The bill also includes an emergency clause, making all of its provisions without other specified effective dates effective retroactively to Jan. 1, 2021.
The bill’s fiscal note says its impact on local government budgets in Idaho is “hard to quantify,” but says the budget limits “may result in curbed budget growth by as much as 23% in some cases.” It also estimates that the bill’s impact on the state general fund, largely because of the business personal property tax changes, would be a negative $2 million next year and $8.1 million each year thereafter.
Five public officials from Canyon County testified against the bill. Nampa Mayor Debbie Kling said, “We’ve been good fiscal stewards, yet I feel like we’re being penalized. … When you said we don’t have to take new construction, we have to provide service, which costs.”
Rick Hogaboam, a former Nampa city councilor and now Kling’s chief of staff, said the Nampa fire chief was rushing to get to the Capitol to testify, but since the meeting was convened so quickly, probably wouldn’t make it in time. Hogaboam noted that his father, a Vietnam veteran, asked him why his own property taxes on his home went up so much when Walmart’s went down. He said the big increases hitting homeowners are subsidizing lower tax rates for business and commercial property, because it’s been driven by fast-rising home prices.
“Most of the increases are funding tax decreases for our largest property owners, and that has to stop,” he said. “You’re going to limit our capacity to maintain appropriate levels of public safety for our citizens.”
Both Kling and Hogaboam also decried the process that led to the massive bill being proposed on such short notice at the end of the legislative session, noting that cities are required to give public notice and hold public hearings before changing policy.
Others opposing the bill include the Canyon County assessor and controller, who said it will largely benefit commercial and industrial property owners, and homeowners would continue to see increases, because home prices are rising so fast that a 25% increase in the homeowner’s exemption won’t catch it up with the growth.
Canyon County Controller Zach Wagoner said, “The homeowner’s exemption is losing its value.” Canyon homeowners, he said, are “looking at 70-80% increases next year if the homeowner’s exemption stays at $100,000.”
The Idaho AARP also testified against the bill, saying changes to the Circuit Breaker tax break for needy seniors would be harmful.
Note: This story has been updated to reflect that the fiscal impact to the state general fund would be largely due to the business personal property tax changes, not the circuit breaker changes.