Lawmakers target property tax relief after home price spike

While they are usually imposed by local governments, state leaders can drive down tax bills with refunds, exemptions and other changes.
Idaho Gov. Brad Little delivers his 2023 State of the State address held at the Idaho State Capitol, Monday, Jan. 9, 2023, in Boise, Idaho. (AP Photo/Kyle Green)

State leaders are scrambling to lower property tax payments that are rising along with home prices.

Lawmakers in states such as Colorado, Georgia, Idaho, Iowa, Montana and Texas say they are making residential property tax relief a priority this year. Although the taxes are usually imposed by local governments, state leaders can drive down tax bills with refunds, exemptions and other changes.

Both Democrats and Republicans say they want to help fed-up constituents and make sure rising tax bills don’t push people living on fixed incomes, such as retirees, out of their homes.

“There are a lot of people crying for help,” Idaho Sen. Kevin Cook (R) said.

Cook plans to cosponsor a bill that would divert 10% of annual state sales tax revenue to counties to pay for property tax cuts. Idaho Gov. Brad Little (R) wants to spend $120 million to defray local property taxes.

Beyond Idaho, Georgia Gov. Brian Kemp (R) wants to spend $1 billion on property tax rebates. Montana Gov. Greg Gianforte (R) wants to spend $500 million. Texas Lt. Gov Dan Patrick (R) wants to increase the state’s property tax exemption. Colorado Gov. Jared Polis (D) proposed spending $200 million on unspecified property tax relief.

In many cases, state leaders are eying property tax relief as they seek to spend down massive budget surpluses. Idaho ended fiscal 2022 with $1.4 billion in the bank, about a third of the entire state budget that year. Montana has a $1.9 billion surplus.

“We want to give that money back to citizens,” Montana Senate President Jason Ellsworth (R) told Pluribus News in December. “We want to make sure it gets back to them in the right form, whether it be through property tax relief or a rebate check in what they paid in income tax, and we want to be fair across the board.”

Some property tax relief ideas, such as requiring local governments to slow property tax increases, risk creating fiscal problems for cities and counties that rely on the revenue to pay schools, public safety and other services.

Idaho House Minority Leader Ilana Rubel (D) said Democrats support property tax relief but would vote against proposals that slash local budgets. She noted that the legislature could reduce localities’ dependence on property taxes by better funding schools or sharing internet sales tax revenue with local governments.

“We are really pushing hard to get adequate funding of education at the state level, so that all the money doesn’t have to come from the property tax system,” she said.

In many states where lawmakers are debating property tax relief, the typical homeowner pays less in annual property taxes than the national average.

The typical Idaho homeowner owed about $1,800 in 2021, 33% below the national average, according to federal Census data analyzed by Nadia Evangelou, a senior economist and director of forecasting at the National Association of Realtors, a membership group.

The typical Idaho homeowner’s tax bills grew by 11% from 2019 to 2021, 1 percentage point faster than the national average.

Home prices have skyrocketed in Idaho since the COVID pandemic began. The typical home’s assessed value in Ada County, which includes fast-growing Boise, has jumped more than 70% since 2019, according to county statistics.

Property tax bills haven’t risen quite that fast. Property values don’t directly determine property tax payments in Idaho, and state leaders have worked to keep payments low.

Gov. Little in 2020 used $200 million in federal COVID aid to pay local public safety worker salaries, on condition that counties pass on the savings as property tax relief. And a 2021 law raised the cap on the state homeowner’s tax exemption from $100,000 to $125,000.

The average Ada County homeowner owed $2,723 in property taxes in 2022, 4% more than in 2019, according to county statistics.

Idaho lawmakers could consider several property tax relief ideas this session. Rep. Bruce Skaug (R) plans to propose raising the homeowner’s exemption to $225,000 and indexing it to the home price index for the state, according to the Idaho Association of Counties.

Colorado property tax payments are set to spike in tax year 2023, reflecting county assessors’ latest value calculations.

Colorado homes are assessed every two years, said Greg Sobetski, chief economist of the Legislative Council Staff, the nonpartisan research arm of the state legislature. When homes were evaluated last summer, the assessments captured the pandemic-era boom in home prices.

Residential property tax bills could jump by a record 26.5% in tax year 2023, Sobetski said. That’s despite state leaders’ recent efforts to provide tax relief, including a law that cut assessed property valuations in tax years 2023 and 2024.

Polis has proposed an additional $200 million in “immediate” property tax relief. Both Polis and Democratic legislative leaders say they want to come up with a long-term fix.

“It won’t necessarily be cuts, I think it will be around how to make things a little more stable,” Colorado Senate President Fenberg (D) told Pluribus News in December. “So when you have rising — rapidly rising — property values, how do you make sure that you’re not pricing people out of their homes, simply because their property taxes are going up?”

Austin Jenkins contributed reporting