(UPDATED, 5:31 p.m., to reflect the fact that the personal property tax bills are on hold, for Thursday.)
The timing on the ongoing — and fluid — debate over the repeal of the personal property tax — is all noteworthy.
On Tuesday, after House Revenue and Taxation Committee took nearly three hours of testimony on this significant and far-reaching change in the property tax structure, Idaho voters had their say. In districts large and small, from Boundary County to Bear Lake. They went to the polls to approve a startling $107.8 million in property tax levies for schools.
The statewide results were one-sided. Thirty-six districts said yes to school levies. Only four levies and one bond issue failed.
Tuesday night’s results made the ISBA’s Jessica Harrison sound prescient. “Whether we like it or not, many schools relay heavily on supplemental levies,” Harrison told Rev and Tax Tuesday morning.
And the results add more resonance to House Speaker Scott Bedke’s remarks later Tuesday.
Speaking at an Idaho Press Club luncheon, Bedke pointed out that Idaho has gradually eliminated personal property taxes for over a century. What now exists is a misnamed “personal property tax” that is actually a tax on business supplies and equipment. (Idaho Association of Commerce and Industry president Alex LaBeau, a key proponent of repeal, has also argued that businesses are saddled with the last vestige of this tax.)
But Bedke takes the historical analysis a step further. Every time the state has pared back the personal property tax, he says, the state has covered the difference with new income or sales taxes — or used robust state revenue growth to pay for the tax relief. This time, lawmakers are debating property tax relief without a clear way to replace the revenue. And this, said Bedke, may explain the lack of a “clear consensus” on repeal.
But while consensus may be lacking in the Statehouse, there is uncommon consensus in the education community. On Tuesday, Rev and Tax heard from ISBA, IASA, the Idaho Education Association and the Idaho Rural Schools Association. All four groups argued against House Bill 276, LaBeau’s $120 million bill to repeal the tax entirely over six years. The education groups spoke in favor of House Bill 272 — a partial repeal of the personal property tax, carrying an $18 million to $19 million price tag.
Lawmakers also heard from school officials in Soda Springs and American Falls — rural districts that each derive at least 40 percent of their property tax dollars from personal property, and prefer HB 272’s partial repeal. On Tuesday night, voters in both districts passed property tax levies.
And lawmakers also heard from Cassia County schools superintendent Gaylen Smyer, another supporter of HB 272.
Smyer leads a district that operates 17 schools and encompasses a land mass larger than the state of Delaware. Even with personal property taxes included in the equation, property tax proposals are a tough sell in Cassia County. Three bond issues have failed in the past five years. And on Tuesday night, a $23 million plant facilities levy failed.
Throughout this debate, education groups have said that eliminating the personal property tax would shift the tax burden to homes and farms — making it tougher to pass levies and bond issues in the future. If they’re right, more districts could find themselves in a situation similar to Cassia County’s.
What’s next? Both HB 272 and HB 276 are on hold; they have been pulled off Revenue and Taxation’s Thursday agenda. LaBeau says he will introduce a third bill on Friday. Check back at Idaho Education News for continuing coverage.