Idaho Senate passes bill to limit homeowner’s exemption

BOISE – Most homeowners in Kootenai County likely will pay higher property taxes in the next few years, if Gov. Butch Otter signs a bill approved in the state Senate earlier this week.

Idaho’s homeowner’s exemption from property tax would lose its inflation index under legislation headed 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. 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 the median home price in Kootenai County already is over $200,000.

“This would cause a problem for the homeowners in our area,” Souza said. “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, the maximum exemption would 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.

“Every time the exemption changes, it causes a tax shift,” said Sen. Jim Guthrie, R-McCammon. “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.”

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.”

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

Some senators wanted to remove the exemption entirely.

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

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. “I as a business owner feel that we need the stability, and the homeowner’s exemption is definitely a shift to the business owner.”

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. Nonowner 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.