Personal Property Tax 101

Thursday marks a pivotal day in the 2013 Idaho Legislature, with the first public discussion of a bill to repeal personal property taxes.

So this is a good time for Personal Property Tax 101 — a refresher course. We’ve run most of this information before, but it bears repeating.

What is the personal property tax?

The “personal property tax” is a misnomer of sorts, because the property really isn’t “personal.” It is a tax levied on business equipment and furnishings — down to sundry supplies such as computers, chairs and staplers. Businesses have long opposed the tax, partly because it is cumbersome to compile an inventory and pay the tax on supplies that have depreciating value.

What’s the bottom line?

According to State Tax Commission estimates, personal property tax collections totaled $140.9 million in 2012. This affecting some 900 taxing entities — everything from public schools and community colleges to hospitals, urban renewal districts and cemetery districts.

What’s the stake for schools?

According to the State Tax Commission, it’s $38.6 million.

But not all districts are created equal.

Which districts collect the most personal property taxes?

Here’s the Top 10:

  1. Boise (District 1): $ 7,816,625.
  2. Meridian (District 2): $ 2,742,993.
  3. Lewiston (District 340): $2,402,693.
  4. Pocatello (District 25): $1,437,761.
  5. American Falls (District 381): $1,402,156.
  6. Idaho Falls (District 91): $ 1,389,381.
  7. Nampa (District 131): $1,200,636.
  8. Twin Falls (District 411): 1,045,755.
  9. Vallivue (District 139): $992,674.
  10. Lakeland (District 272): $943,822.

Several of these are among Idaho’s larger districts — which stands to reason. But some of Idaho’s smallest districts will get hit the hardest.

How is that?

Idaho schools collect 9.2 percent of their property taxes from personal property, but that’s an oversimplification. So let’s review another Top 10 list, ranking the districts that collect the highest percentage of their property taxes from personal property:

  1. Richfield (District 316): 51.6 percent ($216,949).
  2. Soda Springs (District 150): 48.1 percent ($644,807).
  3. Mullan (District 392): 42.9 percent ($220,794).
  4. Glenns Ferry (District 192): 42.4 percent ($134,503).
  5. American Falls (District 381): 40.6 percent ($1,402,156).
  6. Dietrich (District 314): 35.2 percent ($41,256)
  7. North Gem (District 149): 35.1 percent ($106,632).
  8. New Plymouth (District 372): 34.6 percent ($162,374).
  9. Pleasant Valley (District 364): 32.4 percent ($3,052).
  10. Midvale (District 433): 30.7 percent ($3,997)

By and large, these are rural districts, heavily dependent on industry or manufacturing for their tax base.

What are the long-term implications?

The Idaho School Boards Association and the Idaho Education Association don’t always see eye to eye on labor issues, but on the personal property tax, they have made essentially the same point. Repealing the personal property tax would shift the taxing burden from businesses to homeowners.

And in the future, that could make it tougher for school districts to pass a bond issue or a supplemental levy.

So even if the state replaces the revenues collected from the personal property tax, the repeal would reshape the property tax base.

Are all personal property tax repeal bills created equal?

Again, no.

According to the Associated Press, lawmakers will have their choice of two very different bills.

  • On Thursday, the House Revenue and Taxation Committee will consider a bill drafted by the Idaho Association of Counties — which would enact a $19 million repeal that would cover 89 percent of Idaho businesses. This is modeled after a repeal that passed the 2008 Legislature, but was tied to state revenue targets that have never been met. The ISBA supports this plan.
  • The Idaho Association of Commerce and Industry, the business lobby spearheading the repeal, is working on a $120 million plan.
  • William Peters

    Sad. Of course business would like to lower their cost of doing business with lower taxes. The best would be no taxes, but taxes support communities that businesses operate in. If they don’t want to do that, then they shouldn’t use city or county roads, Interstate hiways, airports, electrical grids, or sewage facilities. Beware of businesses that are not interested in investing in the community that they operate in. I remember Gulf Resources buying the Bunker Hill complex in the Silver Valley and the locally owned business was no longer locally owned. They stripped out profits and left a shell that they weren’t interested in maintaining. Other factors were involved, but when times got tough in the 80’s, they closed quicker than other mines in the area.

    Doing everything business wants is not always good. The promise of jobs is just that–a promise. Idaho now leads the nation in the percentage of our people working at or below minimum wage. Giving businw,ess everything they want has helped produced that environment.

  • William Goodnight

    Why do I not ever see mention of the fact that the personal property tax is a constitutional directive and repeal would require a constitutional amendment – thus 2/3 approval of both houses and approval of voters?

    Idaho Constitution, Article VII,

    SECTION 8. CORPORATE PROPERTY MUST BE TAXED. The power to tax corporations or corporate property, both real and personal, shall never be relinquished or suspended, and all corporations in this state or doing business therein, shall be subject to taxation for state, county, school, municipal, and other purposes, on real and personal property owned or used by them, and not by this constitution exempted from taxation within the territorial limits of the authority levying the tax. (My emphasis)

    It seems pretty clear to me. If they are successful at convincing the legislature, they have to convince the public. It will be interesting to see how they try to put lipstick on this pig.