A proposal to tie the annual homeowners property tax exemption to a market index again has been introduced by the Idaho House Revenue and Taxation Committee.

Opponents worry the change would shift more of the tax burden on farms and other commercial property.

The Idaho Farm Bureau Federation opposes House Bill 78 “because of the tax shift that would occur onto agricultural land and commercial properties,” said Braden Jensen, governmental affairs director.

Current law says an owner-occupied primary residence and up to 1 acre are exempted on half the assessed value or $125,000, whichever is less.

The maximum was $125,000 in each of the last two years and $100,000 from 2017 to 2020.

Each taxing district can raise property taxes by no more than 3% unless it applies new construction, annexations or voter-approved bonds and levies, according to the state Tax Commission.

Home values have appreciated faster than commercial values in much of the state in recent years.

The state used indexing as tax-relief tool from 2007 to 2016.

Since 2016, “the homeowner’s overall share has been increasing,” said Rep. Bruce Skaug, R-Nampa, the bill’s sponsor. In Canyon County, the tax burden on homeowners increased by 47% while the burden on commercial property dropped by 49%.

“Big corporations don’t like my bill” because “their taxes are going to go back up to where they should be,” he said.

Homeowners carry most of the property tax burden in most counties, Skaug said. “I’m just trying to toggle it back a little bit and recalibrate to bring a fair balance on property tax distribution.”

In each county, he would like to see the property tax burden equally shared between  residential and commercial property including agriculture. He owns all three types of property.

House Bill 78 would change the homeowners exemption to the lesser of 55% of assessed value or $224,360, the amount it would be now if indexing had not been removed in 2016, the bill’s purpose statement said.

For tax year 2024 and beyond, the Tax Commission would adjust the maximum exemption based on the annual change in the Idaho all-transaction index as determined by the Federal Housing Finance Agency.

The bill’s new maximum exemption mostly reflects price gains over the past three years, said Miguel Legarreta, president of the Associated Taxpayers of Idaho.

But during the late 2000s downturn, “one of the issues was that your exemption was dropping but your taxes were not dropping,” he said. With indexing, “you’re going to be dealt some good hands and some bad hands.”

It is probably better to use a fixed maximum exemption and update it as needed, Legarreta said. Given cycles and anomaly years, “let’s just think good tax policy and do what we can for property types.”

Counties and the Tax Commission already have years of experience operating with an index, Skaug said. The legislature is considering several property tax relief bills.