Much is now known about the current  state of personal property tax in Idaho. We reported on the top revenue losing cities, should the Legislature eliminate the business property tax. Data dumps from the Idaho State Tax Commission and from the Idaho Center for Fiscal Policy delivered raw numbers on the ways that local governments rely on the personal property tax and who pays it. And StateImpact Idaho has helped visualize the effects of repeal on counties, listing the top five personal property tax payers in each county.

In December, Democrat Grant Burgoyne suggested that some type of local taxing authority could replace the $140 million in lost tax revenue that a repeal would cost local governments. Governor Butch Otter agreed in his State of the State that he would support some type of “broad” local option tax as well. The most frequently discussed local option tax—perhaps the easiest to pass—is a local sales tax.

Boise State graduate assistant April Hoy, working with the Environmental Finance Center, took a look at what kind of sales tax hikes counties would need to implement to make up for lost property tax revenue. Fifteen of Idaho’s 44 counties would need to raise sales tax by more than 2 cents on the dollar, on top of Idaho’s state sales tax rate of 6 percent.

Almost a dozen counties would need to increase their sales tax rates to 8 or 10 percent. But in the case of Power County, widely reported as the county most dependent on personal property tax, sales tax would need to rise to 27 cents on the dollar to make up for the loss.

Hoy produced the map below using Tableau Public. If you hover over each county, you can view the total amount of personal property tax collected and the sales tax base for 2012. You can toggle the map between county government values and the total value of all local governments within the county. It is interesting to compare this map to the StateImpact map; some counties, like Boundary County, for example, stand to lose a lot from a property tax repeal, but could make up for it with a relatively robust sales tax base.

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The views and opinions expressed here are those of the writer and do not necessarily reflect those of Boise State University, the Center for Idaho History and Politics, or the School of Public Service.

  • The local option tax makes sense for urban areas, and will help broaden the tax base – making local governments more sustainable, and potentially reducing property tax rates – making all Idahoans happy. But it won’t work to help rural economies.

    The potential repeal of the PPT shows how distorting the tax has been. Some places like Power County and Caribou county, have only been able to “stay in business” essentially because of the PPT. Nobel Prize winning economist Doug North noted in his seminal 1955 article “Location Theory and Regional Economic Growth,” that in many cases, economic activity can only be sustained under “hothouse conditions.” By this he meant that some places do not have the material resources necessary to maintain economic activity, and they can survive only if they are propped up. Welcome to Power County, Idaho. In a truly free market system places like Power and Caribou would not survive in their current form. And it very well may come to pass, that people there will have to move to urban areas to get urban services, and the county governments will shrink to very small administrative units.

  • hedges&quills

    I have mixed feelings about the local option tax in this instance. I don’t like the idea of shifting the burden from businesses to a regressive tax on individuals.

    On the other hand, I think that localities should have the option of taxing themselves at a higher rate to provide a higher level of service. If the personal property tax is going down anyway, I think it would be better to at least get the local option tax as a silver lining than nothing at all.

  • Glenn

    An increase in sales tax may not compensate for the personal property tax but (and I know it would never be heard on Idaho’s capital) a 1% increase in property tax on religious churches and institutions would solve all financial ills each county has. Why do I have to pay property tax as an individual land owner while churches and corporations exempt? Aren’t corporations and churches people too?

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