Property Tax Shock Wave

By Senator Brent Hill

The first rule for treating a person in shock is to “immediately comfort the person if they are conscious.” For those who are still conscious after recently receiving their property tax assessment, I will try to provide some comfort—however tenuous it may be. I hope the answers to the following questions I have been asked will provide some solace:

Q:  My property values went up 30% this year! Does that mean my tax bill will increase 30%?

A:  No. The only segment of property taxes that increased in proportion to property values was repealed by the Idaho Legislature in the special session held last August. By shifting the public school maintenance and operations (M&O) tax burden from property taxes to the State, your tax bill was reduced about 20%.

Q:  I didn’t see a 20% reduction in my tax bill. Why not?

A:  The Legislature’s actions reduced your property tax by about 20% of what it would have been without the law change. Other factors may have offset the decrease such as larger city or county budgets or school levies passed by a vote of the people. But remember that your tax bill would have been significantly more without the passage of House Bill 1 last fall.

Q:  Can my city and county increase their budgets as much as they please?

A:  No. State law prohibits local taxing districts from increasing their budgets by more than 3% each year, plus a factor for new construction. Even with these restrictions, citizens need to attend their city and county budget meetings to make sure the taxpayers’ money is being frugally and prudently expended.

Q:   So, how much will my taxes increase?

A:  That will not be determined until the taxing districts set their budgets. If the taxable values of all property in your taxing district increased at the same rate as yours did (even if that was 20%, 40% or 70%!), your property tax will raise only to the degree that the city, county and other taxing district budgets increase, which again are restricted by law.

Q:  What if my property values went up more than my neighbors’?

A:  That’s when it hurts. Not every taxable property value increases at the same rate. If your property value is increasing at a faster rate than other properties in your area, then you would have a tax increase even if taxing district budgets were frozen.

Q:  How much leeway does the county assessor have in establishing the value of my property?

A:  The Idaho Constitution requires that all property be stated at its fair and just value. Still, valuations are somewhat subjective and Idaho does not require the disclosure of real estate sales prices to assist the assessor.

Q:  Has the Idaho Legislature provided any other property tax relief?

A:  Yes. In 2006, the Legislature increased the homeowner’s exemption from $50,000 to $75,000, and indexed it to housing inflation. For 2007, the maximum homeowner’s exemption has grown to $89,325. But, remember that this measure did not reduce overall property taxes; it simply shifted the burden from homeowners to business and agricultural property. Removal of the school M&O provided property tax relief for ALL taxpayers.

Q:  How can I help keep property taxes under control?

A:  Although the State governs the way property taxes are handled, all property taxes are collected and expended at the local level. Your input to local elected officials will greatly enhance their effectiveness as they administer this complex tax system.