Ferguson: Idaho Public Schools Are “Big Loser” Under Personal Property Tax Plan

Aaron Kunz / Boise State Public Radio

The Idaho Center for Fiscal Policy's Mike Ferguson spoke about the push to repeal Idaho's business personal property tax at a January panel discussion.

Local government and school officials from around the state have been weighing in on the Legislature’s draft bill for phasing out Idaho’s business personal property tax since news of it broke last week — even though the draft has not yet been introduced in the House Revenue and Taxation Committee.

The bill would phase out the tax over six years and provide limited replacement dollars to local units of government, which will collectively lose $141 million if the tax goes away.

The Idaho Center for Fiscal Policy’s Mike Ferguson dissects the draft bill with an eye toward education funding in a piece published today.  Public schools will be the “big loser” under the proposal, he says, for three reasons. 

First, the draft bill will remove $90.5 million from the state General Fund to replace tax dollars lost by local units of government. Ferguson, the state’s former chief economist, believes that cut will result in less funding for schools.

Second, Ferguson writes, the bill that’s circulating would allow a tax shift onto real property — like homes and agricultural land — to make up for as much as $41.2 million of the foregone tax revenue. Ferguson surmises those higher property tax rates will make voters less likely to support the supplemental levies on which schools increasingly rely.

Finally, the draft bill does not include replacement dollars for levies enacted after 2012. That means districts in which business personal property makes up a substantial portion of the tax base will find themselves with a much smaller tax base from which to raise supplemental revenue going forward.

Idaho’s urban renewal districts, which support local economic development, are also not eligible for replacement funds under the draft bill.  StateImpact will have more on that soon.

Ferguson’s analysis is available here.