Sen. Shawn Keough, R-Sandpoint, got a surprise last month when former state Rep. Max Black, a gifted woodworker, and an array of others, including Senate President Pro-Tem Brent Hill, presented her with a custom-made gavel carved in the shape of a woman’s shoe. It was a reminder of when Keough was co-chairing an interim tax committee in 2005, and at a raucous hearing in the Sandpoint High School auditorium, famously slipped off her navy-blue pump and banged it on a table for lack of a gavel to quiet the unruly crowd.

“It was a tense moment at the time,” Keough recalled with a smile. “As time goes on, you look back and go, ‘Oh, that was kind of fun.’ It’s that North Idaho inventiveness, where you just use the tools you’ve got available.” The very same issue that riled up that Sandpoint crowd – the adequacy of the homeowner’s exemption from property taxes, and whether various types of property taxpayers in Idaho are paying their fair share – is under debate again this year. Last night, the Senate voted 23-11 with Keough and several other North Idaho senators in opposition, to remove the inflation indexing from the homeowner’s exemption.

Here’s my full story from spokesman.com on the change, which is now headed to the governor’s desk:

BOISE – Idaho’s long-prized homeowner’s exemption from property tax would lose its inflation index, under legislation that won final passage in the state Senate late Tuesday and now heads to the governor’s desk.

The change is small – homeowners whose homes are worth $200,000 or less would see no change next year, and those whose homes are worth more would only gradually lose part of their exemption as home values rise. But it marks a return to a situation that led to a statewide tax revolt two decades ago, and the vote came as some senators said they wished they could do away with the popular exemption altogether.

Most of North Idaho’s senators opposed the change, saying most homes in their region already are worth more than $200,000 – so most homeowners would lose. “My legislative district takes in a lot of residential property,” said Sen. Bob Nonini, R-Coeur d’Alene, who voted no.

Sen. Mary Souza, R-Coeur d’Alene, said, “I’ve been receiving emails from our county assessor, who says that as a county, our median home price is already over $200,000 and this would cause a problem for the homeowners in our area. Both the Post Falls and Coeur d’Alene chambers have expressed that they do not like this bill.”

The exemption shields half the value of an owner-occupied home from property taxes, up to a cap that since 2006 has gone up and down with the Idaho Housing Price Index, rising as high as $104,000; it’s currently at $94,745. Under the bill, HB 431, the maximum exemption would instead be fixed at $100,000 or half the home’s value, whichever is less.

The exemption doesn’t change the total amount of taxes collected; if the homeowner’s exemption goes up, all other types of property taxpayers in the district – including commercial, industrial, rental and vacation property – pay a little more to make up the difference; if it goes down, they pay a little less.

Sen. Jim Guthrie, R-McCammon, said, “Every time the exemption changes, it causes a tax shift. … If the market moves in Idaho one way or the other, there’s no law that says we can’t revisit this and move that $100,000.” He said HB 431 is “offering policy that is sensible, stable and fair.”

But lawmakers left the maximum exemption unchanged from the time voters set it at $50,000 in a 1983 initiative until 2006. During that 23-year period, home values soared, causing the exemption for many homeowners to fall far below 50 percent.

Sen. Shawn Keough, R-Sandpoint, recalled co-chairing an interim committee that held hearings around the state in 2005. “Many of us were hearing very loudly from homeowners about being taxed out of their homes,” she said. The hearings “were quite boisterous, and the message was very clear, that we needed a change.” She noted, “The homeowner’s exemption did not get any significant look … from 1983 to 2005.”

At one of those hearings, held in the Sandpoint High School auditorium in July of 2005, Keough famously banged her navy-blue pump on a table for lack of a gavel to quiet the unruly crowd.

Keough asked the Senate, “Is it going to be another 20 or 30 years before we or our successors have this discussion again? … History shows us that we’ll walk away from it for 20 years.”

Senate Tax Chairman Jeff Siddoway, R-Terreton, said, “This bill could’ve been better, it could’ve been a lot better. We could’ve taken this exemption completely off.”

And Sen. Dean Mortimer, R-Idaho Falls, said businesses pay too much in taxes because homeowners get the exemption. “This homeowner’s exemption is a tax shift,” Mortimer said. “In my opinion it is very unfair, but it is the law. It is taxation without representation.” He said business owners don’t get to vote like homeowners. “I don’t get another vote for every business property that I own, so I really only have one vote when in fact I’m paying on multiple properties,” he said. “From a business owner standpoint … I as a business owner feel that we need the stability, and the homeowner’s exemption is definitely a shift to the business owner.”

Sen. Dan Johnson, R-Lewiston, said the bill involves a tax shift, just as the exemption does – it’s just who the tax shifts from and to. “I have visited with my county officials and received their input, and they do not support this,” he said.

According to the state Tax Commission, owner-occupied residential property, which qualifies for the homeowner’s exemption, paid 44.9 percent of all property taxes in the state in 2015. Commercial property was the next-highest, at 28.6 percent. Non-owner occupied residential property made up 19 percent. And all other categories, including agricultural, utility, mining and timber, were at low single-digit percentages.

The bill was pushed by the Idaho Association of Realtors and agriculture and business interests. It passed the Senate on a 23-11 vote after much debate; it earlier passed the House 55-15.

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