By Robert McQuade,
Ada County Assessor
Last Friday I received a message left on the Boise Mayor’s hotline. The caller said, “The tax assessor must be smiling all the way to the bank thinking we were going to get any [property tax] relief.” If the caller only knew that my assessed property value increased 21% this year! As a result, my taxes will most likely go up by more than 15%. Bottom line: if I get a raise this year, more than half of it will be used to pay my tax bill.
While a 15% tax increase is hard to swallow, I at least have a clear understanding of Idaho’s tax laws and how the tax system is structured. For those of you who are as troubled as I am about skyrocketing assessments,
I’d like to arm you with the following facts so you can at least make an informed call for meaningful tax reform.
Ada County’s real estate market has experienced unprecedented growth. According to Intermountain Multiple Listing Service, the median price of all properties sold in the first quarter of 2005 was $173,300; by the 4th quarter of the same year, the median price soared by 22% to $211,575. Why is this important? Idaho’s Constitution and statutes passed by lawmakers require each county assessor to appraise property at current market value. If they don’t, the state tax commission may adjust property values to reflect the true market trend.
Land values have followed the same amazing upward trend. Many people speculate land values were only increased to offset lost revenue brought by the expanded homeowner’s exemption. This assumption is wrong for two reasons. First, any deficit created by the increased exemption could easily be made up by increasing the levy on the 49 other taxing districts. Secondly, and perhaps more to the point, continued demand for land in Ada County has caused bare land prices to explode – in some cases by more than 100% in less than a year’s time.
One other question I am always asked is, “Where’s all that extra money going?” The answer is simple; there is no extra money or “windfall,” to the county or any of the taxing districts. Other than schools, the current tax law caps local government budgets at 3%, with a growth component allowing counties to tax new construction, not yet on the tax rolls, with last year’s levy rate. Ultimately, increased property values decrease the levy rate. For example, the total tax levy for Boise residents went from a high 2.1% ($2.10 per $100, value) in 1994 to 1.76% ($1.76 per $100 value) in 1995. But as we all know, such decreases can’t offset double-digit increases in property values.
Lawmakers moved in the right direction by increasing the homeowner’s exemption to $75,000 and including land in the exemption. But as I told many lawmakers during the session, increasing the exemption by $25,000 would not lead to any real relief, since we were already seeing property values increase in excess of 20%. On a bright note, the legislature did tie the exemption to the Idaho Housing Price Index, which means it increases with market inflation instead of staying static at $50,000 as it has for the past 25 years.
Governor Risch sees the opportunity for property tax reform and seems willing to take bold steps to bring tax relief to Idahoans. Personally, I think the school maintenance and operation (M&O) budget should be covered by a sales tax increase and removed from property taxes altogether. I urge you to contact both your state representative and senator and ask them to support Governor Risch’s call for a special session to solve this property tax issue once and for all.
Robert McQuade has served as Ada County Assessor since he took office in 1995.
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Jun 8, 2006, 3:29 pm
Regarding the answer to the question “Where’s all that extra money going?” I still don’t get it, could someone please explain this better to me. I know I’m paying more, and 6 or 7 others I have spoken to say they are paying more. There must be a windfall.
My assessed value increased 19.5% and my (estimated) property taxes increased by the same 19.5% not the 3% gov’t spending growth cap Mr McQuade refers to.
Signed; confused cynic
Jun 8, 2006, 4:10 pm
I think the answer is tax dollars don’t just go to city and county governments. Schools are not subject to the 3% tax cap AND the second part of the answer is that the overall levy goes down as the revenue generated by increased values goes up (only maybe not at a commensurate rate).
I am as frustrated with the current system as anyone, BUT I thank Mr. McQuade for his honest and candid approach. I have always found it interesting how for years property values were only reassessed every several years (seemed like six or seven years in between)but when the new valuation showed up people screamed bloody murder. They always forgot that they had been paying taxes on an old rate for 6 of the seven years…anyway, I may not like it, but I do appreciate the explanation.
Jun 8, 2006, 7:32 pm
How is shifiting the taxes from property taxes to sales taxes an improvement? We pay the same total amount either way (though people with lots of property win and people without property lose). The taxes need to be reduced.
Jun 9, 2006, 9:55 pm
The property tax issue is a problem that must be solved at BOTH the state and local levels. At the state level, the Idaho Constitution and state statutes dictate how the property tax system will function. It is the duty of the Governor and Legislature to make necessary changes when things go awry. At the local level, local elected officials must act to prevent wasteful, unnecessary spending.
In recent years, residential property values have increased at a much faster rate than have commercial property values. Therefore, homeowners have been taking on a skyrocketing and unfair share of the property tax burden. This is one reason why, even though there are limitations on the amount local property tax budgets can go up, homeowners have seen such an exorbitant increase. The other reason is because there are “loopholes” in those budget increase limitations.
The Legislature moved in the right direction this year when they increased the maximum value of the 50 percent homeowners’ exemption from $50,000 to $75,000. This increase resulted in a property tax “savings” of about $400 for homeowners in Ada County. Even for those people whose property taxes still went up, they went up some $400 less than they would have if the Legislature had not increased the maximum value of the homeowners’ exemption. Still, it is not enough, and for property tax equity to be achieved, the exemption MUST be increased further.
Taking school maintenance and operations (M & O) off the property tax is great, unless it results in an increase in sales tax. Sales tax is regressive. In other words, proportionately, sales tax hurts the lowest income people the most. Therefore, the Legislature ought to take the sales tax off basic necessities, such as food, particularly if the sales tax rate is ever increased again.
At the local government level, local elected officials determine property tax budgets and expenditures. They must learn to prioritize, cut the wasteful spending, and lower property taxes for us all. Wasteful spending is a burden on all property owners.
The property tax problem in Idaho can be solved, but only when both state and local elected officials ALL start taking the necessary steps to reduce the burden on property owners.
Jun 12, 2006, 12:23 am
Sharon, while your information is very interesting it still comes down to just who and when will this happen? People are elected promising lower taxes then poof taxes are not lowered for the working stiff. Taxes are lowered for companies “to provide more jobs” at Idaho’s low wages. Just when will we tire of this and when we do, then what do we do – vote for yet another person willing to lie to get the vote?
Jun 14, 2006, 8:08 am
First, I’d like to say thanks to Mr. McQuade for both his honesty and his candor. Also for his service to Ada County taxpayers. His is a thankless job.
Having said that, I have to disagree with him on using sales tax money to fund school maintenance and operations. I agree with Sharon – the sales tax is a regressive tax. Replacing property tax with sales tax does little to solve the tax problem.
If a sales tax increase were to replace property tax for school maintenance and operation, the legislature should require both better financial accountability and more efficient service delivery from our schools as part of the package.
Folks I know who follow local education matters tell me schools have a tendency to fly under the radar screen when it comes to both financial accountability and efficient delivery of services. Teachers, they say, are doing an excellent job of educating young minds – sometimes under difficult and trying circumstances. The problem is with board members, school administrators, and logistical support activities including transportation services. I’m told these shortcomings are well documented in budget documents and various state reports if one takes the time to look.
For those of us who itemize our tax returns, there is a second problem with this proposal. With less to deduct for property taxes both federal and state income taxes increase. The Feds win and the State wins double – both sales tax and income tax revenues increase.
Also, what impact does increasing the sales tax and lowering property taxes have on businesses? Perhaps someone can shed some light on that one.
It IS locally elected officials (city councils, county commissioners, school boards, highway district commissioners, fire district commissioners, etc), not the legislature, that determine how our property taxes are spent. As taxpayers, we need to insist these groups be proper stewards of our tax dollars.
How? Develop expertise in an area, review budget documents, form an interest group, meet face to face with elected officials, ask questions of them and their staff members, and don’t take pat answers. But, above all, be honest, respectful, and factual in your dealings. If you want to see you property taxes either stabilize or with luck go down, you need to be active in the process.
And Sharon, are you planning to offer another readers opinion to the Statesman providing an alternate view to Mr. McQuade’s recent one? Hope so.
Jun 14, 2006, 5:28 pm
Slim Jim – You are correct that it is always easier said than done to make things change for the better, particularly with regard to government and taxation.
I think people need to take a genuine interest in who is running for office and find out what they really stand for and what they have done. Empty promises from candidates about what they WILL DO if elected are NOT enough. Look for candidates who have gotten involved and already have a proven track record outside of elected office. Then, get out and vote, not for the candidates who have the most campaign contributions from special interests, but for the ones who have the most passion for doing the right thing for the public as a whole.
Beyond that, we need to encourage all of our friends, family members and neighbors to do the same. If you are not finding candidates you want to support, then it might be necessary to take the next step and run for office yourself (which is what I’m doing) or at least seek other people to run whom you would support.
There are other ways to make a difference as well. Posting on the Boise Guardian website is a start. You can also submit letters to the editor to express your views in order to make people more aware, and put pressure on our elected officials. You can join The Common Interest and participate in expressing your opinion on issues of interest in a meaningful way. (www.thecommoninterest.org)
This past legislative session, I worked with others to organize a rally at the statehouse in order to put pressure on the Legislature and the Governor to increase the maximum value of the homeowners’ exemption from $50,000 to $100,000. There is obviously still more work to be done, since it was only raised to $75,000, and if you are willing to get involved I would love to hear from you. I can be reached by telephone at 362-0843 or by e-mail at firstname.lastname@example.org
The bottom line is that if we give up and just accept that things cannot change, then they never will. We have to be willing to take action to try to make a difference. If enough people do so, progress WILL be made! If we all give up, bury our heads in the sand, and don’t take action to have better representation in government we will get what we deserve, which is about what we have right now.
Jun 20, 2006, 6:21 pm
I am one persistent guy; you have to be when you deal with politicians and their excessive taxation.
Now common sense told me that a $25,000 increase in the Homeowners property tax exemption would not work because the assessor would simply keep on raising the value of your home.
Shifting the burden of supporting our schools from the homeowners/property tax to a sales tax won’t work either because you are simply shifting the tax burden , which is always borne by those in the lowest income brackets , from property tax to an increase in sales tax which makes all necessities for low-income Citizens more expensive.That is simply a continuation of a regressive tax.
Our system is supposed to be based on a progressive tax basis-That is those who make more,pay more tax. Of course during the last 20 years Idaho’s one-party system of economic elitists ( who use different party labels) have been trying to change that very American financial system.
If, as the assessor points out, the Idaho legislature did tie the exemption to increases in assessed value in the 2006 session that would help but my question there is…
Why did the legislature take 25 years to do this and how long will this last?
Jun 21, 2006, 7:04 pm
Mr. McQuade is obviously a politician. What a misleading answer to …
One other question I am always asked is, “Where’s all that extra money going?”
The answer is simple; there is NO extra money or “windfall,” … the current tax law caps local government budgets at 3%, WITH a growth component allowing counties to tax new construction, not yet on the tax rolls, with last year’s levy rate. Ultimately, increased property values decrease the levy rate. … BUT as we all know, such decreases can’t offset double-digit increases in property values.(emphasis mine)
In the English language, the preposition ‘but’ erases everything that was said in the previous phrase. So in effect, there IS a windfall to local governments despite the increased excemption and despite the 3% budget cap. Local governments benefit two ways – more money from current homeowners and more money on new construction because it is being assessed at the new, higher rate.
In all fairness, local governments in the Treasure Valley have put in a lot of infrastructure – sidewalks, police forces, parks, etc – that now have to be maintained. Eventually new construction income from building permits will decline and the money for the budget has to come from somewhere. If a local government plays their cards right, the extra money DOES come from increased property tax assessments. After all, an increase in property values reflect a thriving local economy. If home prices were falling, that would mean people are leaving the area or not able to afford to move-up which is bad news for any town.
Is there relief? Hopefully the levy rate will be reduced. It should be. I’m not sure I agree that the Prop-13 type of property tax system is good for Idaho. It doesn’t seem to have been good for CA. A creative solution needs to be found. Perhaps there could be a multiplier applied to the tax bill where the property owner gets a variable credit for each year that they stay in their primary residence. For instance, an elderly widow has stayed in her primary residence for 20 years. Without the adjustment, her tax bill would be $3000 a year. But she gets a credit for every year she has owned the property – say 20% which comes to $600. So her actual tax bill is $2400. If she dies or sells, the new people have to pay the $3000 a year tax bill.