Growing Pains: An Out-Of-The-Box Solution To Rising Property Taxes In Ada County

Sep 29, 2020

Last week on our “Growing Pains” series we took a deep dive into property taxes. We talked a lot about how those taxes have been going up in the Treasure Valley, why they’re going up, and about three possible ways to help homeowners. 

Here are the options we dicussed on Idaho Matters last week: 

1. Removing the cap on the homeowner’s exemption.

2. Freezing property tax increases for a year.

3. Stopping cities from increasing tax collection due to new construction.

All three of those ideas failed to pass during the 2020 legislative session.

But we wanted to look at some other ideas that might ease the burden on homeowners who face rising taxes. Idaho Matters producer Samantha Wright filed this report. 

Modified transcript: 

Last week, you heard Ada County Assessor Bob McQuade give a couple ideas of how to help homeowners, including:

“Increasing the benefits for the property tax relief program,” said McQuade.

That’s code for the Circuit Breaker. Have you heard of the Circuit Breaker? A lot of people haven’t. A lot of others don’t think it applies to them, including some folks I talked to for this story.

Put simply, the Circuit Breaker works like this: if you qualify, the state will pay part of your property taxes up to $1,320. You have to own and live in your home. You can only make so much money. And you have to be either over 65, a widow, blind, disabled or a disabled veteran. Once you qualify, how much of that $1,320 you get to take off your taxes depends on your income. The higher the income, the lower your tax break. 

According to Idaho State Tax Commission Property Tax Policy Bureau Chief Alan Dornfest, the program has been around since 1974 and it changes slowly. It’s been stuck on $1,320 since 2006 and not long ago a group of county assessors, including Bob McQuade, advocated bumping up the Circuit Breaker to $2,600 to give folks, especially seniors and veterans, a bigger break. But how much of a break would that be?

In 2019, people living in 27,575 homes in Idaho got an average $685 dollar break on their property taxes. And 46 percent of them got all their property taxes paid through the program. But what about the other 54 percent?

The median income for Circuit Breaker folks was $16,974. If you’re bringing in less than $17- grand a year, any increase in taxes is tough to handle. And people in the program saw an average hike in their taxes of 13.3 percent from 2018 to 2019.

But there are a lot of people who do not qualify for the Circuit Breaker who also make very little money or who live on a fixed income. And they don’t get a break on their taxes because property taxes in Ada County are regressive when property values go uup, according to Guido Giuntini and Steve Hall. They are both lecturers in the Economics Department at Boise State University. 

“These are the kind of things that are hidden behind the scenes and I think as you start to dig into it a little bit more, you find that,” said Hall. 

The economists used U.S. Census Bureau numbers to look at 2012 and 2018 incomes and property values in Ada County. And they found that for the average homeowner, the value of their house went up 87 percent in six years. And the average income only went up 22 percent. 

Credit Steve Hall

And the numbers get worse as your income level drops.

In that same time frame, homeowners in the bottom 20 percent of income actually lost lost four percent of that income. And in six years, they saw their average property values shoot up by 143 percent! They kept paying a higher percent of what they make on property taxes.

People in the top 20 percent of income got hit too, but not nearly as much. Their average income increased 20 percent while their average house value went up 77 percent.

Credit Steve Hall

So, they came up with a progressive tax structure. It works the same way you pay your income taxes using tiers or levels. First, they throw out the Homeowners Exemption. Say your home is worth $300,000. The first $100,000 is tax free. The next $175,000 is taxed a small amount, in this case $612 bucks. The last $25,000 is taxed at a higher level.

How much you get taxed at each level is based on your home's value. A home worth $200,000 gets taxed less than a home worth $1,000,000.

They say their system would be a fair way to distribute taxes.

Quido and Steve couldn’t find anywhere in the U.S. that had tried this system, which isn’t surprising because neither of them think that their proposal will gain traction with lawmakers.

They say the study isn’t perfect. It only looks at Ada County’s county taxes, not city taxes or school levies. And there are other things to consider.

Steve says along with all the numbers, he’s worried about the correlation between the study and income inequality. He says the more segmented the society is, the more trouble we get into.

It’s a new idea, when it comes to property tax relief, and--

“And sorry, can I interrupt for a second?”

Oh, sorry Guido, go ahead.

“Steve created a nice app that you can adjust the brackets and you can adjust the rates, so you can play with it.”

Cool. Excuse me, I’ve got to go put my house in the app and see what happens...

Gemma: That was our producer, Samantha Wright, with just a couple more ways people have proposed easing the strain of rising property taxes.

Samantha: Hey Gemma?

Gemma: Yes Sam?

Samantha: One more quick thing I learned with the Circuit Breaker. Have you ever heard those Reverse Mortgage commercials with actors like Robert Wagner, Tom Selleck, and Henry Winkler…”The Fonz?”

Gemma: Sure.

Samantha: Turns out there’s something like that with Idaho’s Circuit Breaker and it’s called the Property Tax Deferral Program. If you qualify, you can stop paying any property taxes on your home. The taxes are “deferred” until you sell the house or you pass away. Then those deferred taxes are repaid out of the sale of your home.

Gemma: Sounds too good to be true.

Samantha: Well, they do put a lien on your home and your heirs will get less money from the house when they sell it. But, for some folks who have no other income, and can’t pay the higher property taxes, it might be an option.

Gemma: Thanks Sam.

This interview is part of our new series called "Growing Pains." The series explores stories and issues surrounding the Treasure Valley's rapid growth and increasing unafforability. Subscribe to our podcast to hear every interview, and download the Boise State Public Radio app to send us a voice message using our Talk To Us feature.

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