Idaho Statehouse

A March 4, 2020, photo of the Idaho Capitol in Boise. The Idaho Legislature has voted to shut down for several weeks due to an outbreak of COVID-19. Lawmakers in the House and Senate made the unprecedented move on Friday, March 19, 2021, with significant unfinished business, including setting budgets and pushing through a huge income tax cut.

When your lawmaker returns from the legislative session, they’re likely to brag about cutting your taxes. Don’t buy it. Ask them why they raised them — because that’s what they’re doing.

The Legislature is pushing through a last-minute income tax cut, which seems likely to pass. What benefit would ordinary people get from it?

A family making $500,000 per year can expect a nearly $2,000 tax break each year. But the median household in Idaho brings home less than $56,000 per year. How much tax relief would this household get? About $90 per year. A few tanks of gas.

Except they probably won’t get to buy that gas because they’re likely to spend that much and more on higher property taxes.

Property taxes are a bit counterintuitive. Local taxing districts set their budgets, and that determines the total amount of tax to be collected. That total tax burden is then divided up among the properties in the district based on how valuable they are, relative to the total value of the property in the district.

Here’s the important point: What matters for your property tax payment is the (1) budget and (2) the relative, not absolute, value of your property. If each property in the district goes up in value by 50% in a year, but the budget stays the same, so does everyone’s property tax bill. So, strictly speaking, rising property values are not to blame for rising tax bills.

But there is one other factor that can cause your property tax to go up, a factor not controlled by local government but by the Legislature. That factor is how the taxable value of each piece of property is determined. The Legislature sets the level of exemptions to that taxable value, and thereby controls how property taxes are distributed across the residential, business and agricultural sectors. Every year since 2016 the Legislature has decided that you, the homeowner, should pay more.

The most generous exemption by far goes to agriculture. Agricultural land is valued through a complex system based on its potential crop yield rather than its market value, with the result that its tax assessment is far lower than it would be if it were assessed at market value.

By fixing the homeowner’s exemption at a nominal dollar value as property values rise, which lawmakers did in 2016, the Legislature is in effect ensuring that every year homeowners are responsible for a larger and larger slice of the total pie, so the slices assigned to businesses and agriculture necessarily shrink.

And that’s why the Legislature’s position on the exemption has been so ludicrous. Whenever raising the homeowners’ exemption is brought up, many in the GOP will say they oppose it because it’s a transfer of tax liability from homeowners to businesses and agriculture. But the Legislature has designed a system in which every year tax that residential property values rise, a portion of tax burden is shifted from business and agriculture onto homeowners.

It’s automatic, so it will occur if the Legislature simply does nothing, and nobody has to take responsibility for it. But every year the Legislature does nothing, it is hiking taxes on homeowners. And this year a proposal to stop this automatic tax hike by Rep. Bruce Skaug, R-Nampa, has been denied a hearing.

So the Legislature’s grand tax plan is to continue raising your property taxes while providing an income tax break that will be negligible for all but the wealthy. The next time your lawmaker says they’re looking out for you, remember that.

The Post Register’s editorial board consists of Publisher Travis Quast, Managing Editor Monte LaOrange and editorial writer Bryan Clark. Clark can be reached at 208-542-6751.