Classes of taxpayers, such as homeowners, farm land, business, utilities, etc. must be taxed the same within each class. Some inequities exist within the classes, within limits. Those limits are explored annually by county Boards of Equalization, the Board of Tax Appeals, and district courts. Within a class of taxpayers it is easier to discern inequity.
It is not so easy to arrive at equity between the classes. If taxation is to be held to a “fair” standard that fits everyone the same, then the tax burden between a residential payer, a retail store, a manufacturer, a real estate broker, and a farmer ought to be close to the same – or have a clearly defined public policy that articulates and justifies the inequity. The Idaho Constitution is very clear about the necessity of treating all homeowners or all plumbing businesses the same within their particular class and seems to create the expectation that the same rule apply among the homeowners and the plumbers. But that is where the Legislature, case law, and the Constitution collide.
Business properties are evaluated for taxes on an income-based approach. Not the income of each individual business, but the class of businesses as a whole.
Oversimplified: All widget manufacturing businesses in Ada County potentially generate XXX annually and therefore the property tax value of land used to generate x equals y for widget manufacturing businesses. The result is equity, more or less, among widget businesses, and therefore a stable and consistent cost of doing business among that class of taxpayers with respect to property tax valuation and the subsequent tax liability.
Suppose there is a residence in an area of the county, and a retail widget business moves in just across the street. Due to the slow economy, another 10-acre parcel down the street that is partly developed is returned to farmland. The value per acre is established for the retail widget business, so one might expect the value and taxes per acre on the farmland to be the same – right? Wrong! Each class of taxpayer on the street would have a different per-acre assessment for property tax.
The residence enjoys a homeowners exemption that adjusts annually. But the residence will be assigned a composite value of homes in a similar area and the retailer will have a different value based on retail business. The farm ground will pay tax on a value based on what the Farm Credit Bank of Spokane says the value of production is for commodities this year; any value over that production value will be exempted from taxation.
Four years ago, a Glenns Ferry businessman approached me with a complicated request. He said, “Property taxes are unfair. Farmers get away scot free while we main street businesses pay a huge burden whether we make any money or not. Fix that.”
Two years later, he saw me again and registered the same complaint. He understood there were city taxes to pay in addition to the county, but this individual owns farm ground and a main street business as well as a residence.
I explained about the farm ground basis of evaluation as a way of determining equity between the taxes on the properties. He was adamant about the difference and had me come to his office, where he showed me tax evaluation notices. I asked for copies of the tax notices, saying that something is wrong and he was correct, this is not fair taxation.
What was Mr. Tax Payer’s response?
“Wait, you are going to raise the taxes on my farm ground!”
“Isn’t that what you asked me to do?” I asked, “…to make them the same?” In order to lower the taxes on the business and home, some properties must pay more – which ones shall it be?
Retired farmer Tim Corder lives in Mountain Home, where he operates a trucking company. He is serving in the Idaho Legislature and writes under the title Inside Out. Follow Tim at www.senatortimcorder.com.