Editor’s note: The question of how to revise Idaho’s property tax structure is a frequent topic In our ongoing discussions of affordability (one of the 5 Big Issues we’re tracking this year). In this opinion piece, George Grenley suggests we look at an approach that has proven beneficial for homeowners in California.
The solution to the property tax problem is simple
Limit annual property taxes to 1% of what you paid for the house, regardless of how much it may increase in value in the years to follow. An increase in assessed value does not increase your taxes.
The fine print
Your property tax would go up if your substantially remodel the house, like adding on an entire room. Minor upgrades and maintenance would not affect your taxes.
Your property tax would go up by the amount of inflation; i.e. the Consumer Price Index (CPI).
Your property tax would go up if TWO-THIRDS of voters agree to raise them.
For current home owners, the tax is 1% of the assessed value minus the homeowner’s exemption, and remains at that amount (plus CPI inflation) for as long as you own the house.
An example
You purchase a house for $250,000. Your annual tax is $2,500, plus inflation, for as long as you own the house.
If, for example, twenty years later you sell it for $400,000, the new owner would pay $4,000, plus inflation, for as long as they own the house.
It worked in California
I’m aware that examples of anything from California may not be well-received by everyone in Idaho, but their experience could inform our approach.
California passed Proposition 13 in 1978. I moved there in late 1976, and know from personal experience of folks who had been taxed out of their homes due to tax increases based on rising assessments.
More details about Proposition 13
Improvements we could make
California’s experience includes a major unintended consequence, as noted in the article referenced above:
It has been described as a contributor to California’s housing crisis, as its acquisition value system (where the assessed value of property is based on the date of its acquisition rather than current market value) incentivizes long-time homeowners to hold onto their properties rather than downsize, reducing the housing supply and raising housing prices.
One suggestion we’ve heard to address that is to increase the Capital Gains Exemption to $1,000,000 to provide a different incentive to homeowners looking to downsize.
There are other questions to be addressed, like “how would the current homestead exemption be handled?” and “what about low income senior citizens, veterans, and people with disabilities?” All valid questions that deserve thoughtful answers.
I hope this article can help initiate constructive conversations about how we could make property taxes more affordable for all Idahoans.
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The featured image above is by Satheesh Sankaran from Pixabay.
George Grenley is a retired electronics engineer. Originally from the great state of Michigan, George worked in Silicon Valley for over forty years, but managed to avoid getting rich. He is now retired to a quiet farm, just southeast of Lewiston proper, where he pursues woodworking and politics, in part via the nice folks at NPC Dems. The opinions he expresses are his own, and do not necessarily reflect those of the Nez Perce County Democrats.
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George Grenley’s article on A Modest Tax Proposal is not founded in economic reality and lacks sufficient fiscal examination to be shared here.
I have spent many hours researching the Prop 13 case since it was passed into law in the late 80’s.
A more reasoned approach is to go back indexing property taxes against HPI as it was here prior to 2018.
I can provide my research, case histories, and fiscal effect for those who are interested.
Larry, we’d love to see your research, etc. As for Proposition 13, it is not clear to me that you have researched it carefully. It was passed in 1978, not the late 80s, and has been economic reality for 48 years. If you want more examination, start here:
https://en.wikipedia.org/wiki/1978_California_Proposition_13