Wednesday, October 05, 2011

Homeowner's exemption; a cute trick

Idaho's homeowners exemption from the property tax is back in the news lately. This story reports on how it's shrinking, and the implication is that homeowners will be paying more taxes because of it.

Isn't the HO exemptions really just a smokescreen, a trick to make homeowners think that the legislature feels their pain and is trying to do something about it?  Why, yes, I believe it is.

See, there is more than one variable that determines how much tax you actually pay on your home.  Most obvious is the taxable value.  If you have a $200,000 home and 50% is exempt, you feel pretty special, thinking how you avoided half your tax bite right off the bat.  Trouble is, the levy by the various taxing districts varies so that you end up paying whatever tax they need, regardless of the taxable value of your home.

Have a look at the chart below, which is the tax history for my home.  (Sorry, you'll have to click to embiggen.)  Anyway, note that the small gray "taxes paid" column barely changes, even though the taxable value of the house drops in half.

Now have a look at this chart.

See, the levy amount is what actually determines how much you'll pay. Go back to the days of wine and roses when my house was double its current value, and you'll see that the levy was half what it is now. Taxable value goes down, levy goes up, the actual dollar amount I pay doesn't change much, and the taxing district gets about the same revenue from year to year.

If there was no homeowner's exemption, I'd still pay the same. I mean, really, take a look. When my property was twice its value (but half was exempt due to the HO exemption) I paid around $900.  Property plummets in value, still paying around $900.

So the next time your glorious legislator brags about shielding homeowners from property tax via the HO exemption, just smile to yourself, 'cause you know that he or she is either lying, uninformed, or stupid.  The HO exemption is simply just a feel-good trick they play on homeowners to pretend that they are trying to help them manage tax liability.

1 comment:

Geoff Schroeder said...

The key to the analysis is the little-known State form L-2, the dollar budget certification to county commissioners for all taxing entities in the county. The two main factors are the various taxing entities' "budget amount to be levied" and the total assessed value of all the taxable property in those entities' districts. In many areas, a steep decline in the total assessed value results in an increase in the levy amounts rather than a reduction or staying the same. Our city's net assessed value dropped some $76 million, increasing the levy amount from .0085 to .010 this year.