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Tax apportionment

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Heading off into pure theory, taxes should hit all people who pay them about equally as hard: That is, they shouldn’t burden some people more than they do others.

In practice, of course, it never happens that cleanly. But it can be something the writers of tax laws, which often means state legislators, can aspire to.

A sales tax in theory hits everyone the same: The state collects six cents per dollar on sales of every taxable item. But in Idaho as elsewhere some items are taxed and others (such as services, generally) are not, and the result of those choices means some people are hit more than others. Lower-income people spend more of their money on items covered by the sales tax, so in practice they’re hit harder (which relates to why sales taxes are considered regressive). The state of Idaho actually recognizes that and provides some compensation for it, as noted on its website: “The grocery tax credit offsets the sales tax you pay on groceries throughout the year. For most Idaho residents it averages $100 per person.”

Once again, as seems to happen once every decade or two, the property tax is the big topic of discussion in Idaho, most especially around Boise. The present reason is clear enough: Property values in the area have been exploding, and the tax rates haven’t dropped to compensate, so property tax payments have been shooting upward. In many cases property taxes have increased by 50 percent or so over the last half-decade. For people on fixed incomes with suddenly more valuable property (which they can’t easily sell, since where would they go?), this is a problem.

It’s not an insoluble problem. There are plenty of ways to go at dealing with it, but some are more surgically precise than others.

One approach, which seems to be moving rapidly through the Idaho Legislature, is the one-year freeze plan offered by House Majority Leader Mike Moyle. His thought is to freeze in place property tax levels for one year, so that the tax amount for 2020 would be the same as it was in 2019.

That would provide some, albeit limited, help for the fixed-income homeowners. But it would have the same numerical effect on others – upper-income people, businesses profiting nicely from the growth in the area that is driving the increase in valuation – so for them, a freeze would amount not to a staving off of disaster but rather a small windfall. The theoretically even application of the tax law would hit lots of people differently, while freezing for a year the budgets of local governments already scrambling to keep up with growth in their area.

Moyle himself has said that one of his main reasons for proposing the bill is to launch a conversation about the subject. An excellent idea, which leads to the question: Are there alternatives? Sure. Actually, quite a few, and they’re worth throwing in the mix.

One of the most obvious would be an extension of the state homeowners exemption.

The last time a general property tax revolt happened, in the late 70s, an initiative (then called the “1 Percent Initiative”) was passed by the voters to clamp a ceiling on property taxes. It was flawed, to the point of being internally contradictory and even unconstitutional, so much of it was dismantled by the legislature before the courts could have their way with it. Some limitations were still imposed afterward, however, and more citizen action led to the state property tax homeowner’s exemption, in which much of the value of an owner-occupied residence is exempted from property taxes. That helped many of the people who were hit by the fast-rising property taxes in the seventies.

The state also has (as the Tax Commission’s web site lays out) other tax help options, including the property tax reduction program, the tax deferral program and a benefit program for some veterans. It could create other options.

That might allow for some more precise ways of helping people who need it, rather than – in the old phrase – throwing a life jacket to a swimmer who’s already reached shore.
 

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