Wednesday, May 2, 2007

California tax reform plan for Idaho? Not so fast

To those who hunger for a dramatic rollback in property taxes and slowdown on assessment increases, California's Proposition 13 is usually held up as the Golden Chalice of tax reform.

Idaho Gov. C.L. "Butch" Otter now seems enamored with some such tax mechanism to solve the Gem State's perennial legislative headache: how to relieve homeowners of the rapidly rising property valuations and increased taxes.

Before falling under the spell of a Prop 13 plan, the best advice for Idaho is: Not so fast!

Whatever benefits Californians found in Prop 13 when it was enacted in 1978 as an amendment to the state Constitution, they also have been plagued by un-intended consequences of the reform.

Tax revenues for public services plunged. Huge in-equities in valuations and taxes of properties next door to each other were made virtually permanent and pub-lic services everywhere went on starvation diets as assessment increases were held to 2 percent regardless of California's skyrocketing property values.

Then came the loopholes. Local governments dis-covered that by zoning land for certain types of high-valuation properties, such as big box stores and large auto dealerships, they could generate new tax reve-nues to make up the shortfall created by Prop 13.

But there's more. Local government also created public redevelopment corporations to condemn land for malls in order to generate another flow of tax dol-lars.

Is it good tax policy to create dramatic property tax relief for homeowners, but then shortchange public services taxpayers rely on and use government land-development schemes to replenish tax coffers?

Idaho already is struggling with shortfalls in public services. The state Legislature has yet to fund repairs of public schools ordered by a court 10 years ago. The state's roads are sorely neglected and face more neglect for lack of funds.

A Prop 13-type tax system would be irresponsible and a traumatic shock to the state's infrastructure.

Gov. Otter is best advised to not throw around hints of a Prop 13 property tax paradise in the offing. It is cruel political pandering, and decidedly not prudent tax policy.

The governor and state lawmakers have eight months before the 2008 legislative session, ample time to lay tax reform ideas on the table and study their ef-fects in order to avoid enacting hasty or panicked re-form.

One starting place is to close loopholes in the state sales tax code, which is rife with special-interest ex-emptions.

Gov. Otter should support taxation that is both fair and wise, not just less taxation.

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