DA ROSA: The Property Tax Trap: Why Eliminating Property Tax Is Easier Said Than Done

By Art Da Rosa

The topic of eliminating Property Tax has been brought up. More than one elected official that I respect has raised it. Personally, I like the idea. I like it from the Constitutional and Liberty point of view. The argument is simple and powerful: if our real property can be taxed, then we, the citizens, do not truly own our property.

Furthermore, property taxes in Idaho have climbed sharply in recent years — driven by soaring home values that increased the typical Idaho home price by roughly 57 percent between 2019 and 2023 alone. For families on fixed incomes, for farmers whose land value has risen but whose income has not, and for longtime residents watching their tax bills grow faster than their paychecks, the call to eliminate property tax is not unreasonable. It is a genuine cry of pain.

As a student of the Constitution, I have to be honest about the challenges that eliminating property tax would present. Yes, the problem is real. The practical consequences, however, are more complicated than the slogan suggests. And the alternatives, when examined honestly, raise problems at least as serious as the one they are meant to solve.

For this article, I draw from classic literature: the US Constitution, the Federalist Papers, the Anti-Federalist Papers, Tocqueville’s Democracy in America, and James Bryce’s The American Commonwealth.

What Property Tax Actually Funds

Property tax is the financial backbone of local government in Idaho and across the nation. It funds county operations, city services, school districts, and — critically — a vast network of small special purpose districts that most people never think about until they stop functioning.

It is worth noting something that sharpens this point considerably: neither the State of Idaho nor the federal government levies property tax. The federal government is constitutionally prohibited from doing so in any practical sense — the original Constitution requires that direct taxes be apportioned among the states by population, making a federal property tax impossible to administer fairly. States have likewise left property taxation entirely to local governments. Property tax is not merely administered locally; it is structurally and constitutionally a local instrument. It flows directly from the taxpayer to the local government that sets the levy — bypassing Boise and Washington entirely. It is the only major tax in the American system that works this way. That fact alone should give us pause before we eliminate it.

In Jefferson County alone, your property tax bill includes levies for the county general fund, road and bridge, the school district, the ambulance district, the fire protection district, the mosquito abatement district, cemetery districts, and others. Each line item represents a real function — mowing the cemetery where your grandparents are buried, treating the irrigation ditches that breed mosquitoes carrying West Nile virus, responding when your barn catches fire at two in the morning.

These small special districts are perhaps the most overlooked piece of this puzzle. A rural cemetery district might have an annual budget of $40,000 — enough to keep the grounds maintained, the fencing repaired, and the records kept. Its property tax levy might amount to $20 per year for an average homeowner. Less than two months of a streaming subscription. There is no plausible alternative funding mechanism for this function. You cannot generate meaningful sales tax revenue from a cemetery. You cannot charge burial fees high enough to cover maintenance without making burial unaffordable to rural families. And asking the State of Idaho to manage rural cemeteries across 44 counties would be so contrary to every principle of local self-governance that it barely deserves mention.

This is not an abstraction. It is the cemetery down the road, maintained by your neighbors, funded through the most direct fiscal mechanism a democracy has ever devised: people taxing themselves for a purpose they have chosen, governed by trustees they have elected. Tocqueville called institutions like this the foundation of American democratic life. He was right. And they run on property tax.

The Tax Menu: What Are the Options?

Before we can discuss replacing property tax, we need to be clear about what the alternatives actually are. Taxes, broadly speaking, fall into a few categories.

Taxes on property — what we currently use for local government. Real estate, personal property, business equipment. The tax is on what you own.

Taxes on income — taxing what you earn. The federal income tax required the Sixteenth Amendment (1913) precisely because the founders were deeply suspicious of taxing persons directly. It is worth remembering that this amendment was considered a significant departure from constitutional tradition, not an obvious improvement.

Taxes on consumption — taxing what you spend. Sales taxes, excise taxes, tariffs. These were the founders’ preferred federal revenue tool and are constitutionally permissible as indirect taxes without apportionment. Hamilton championed them in Federalist No. 12 specifically because they operated through commerce rather than falling directly on persons.

Value-Added Tax (VAT) — the European model. A tax collected at every stage of production, from raw material to retail sale. Administratively sophisticated and revenue-productive, but requiring a large central bureaucracy to administer. It is a solution designed for centralized nation-states, not for a federalist republic built on local self-governance.

Land value tax — taxing only the value of bare land, not structures or improvements. Championed by economist Henry George in the 19th century. Economists tend to like it because it doesn’t penalize building or investment. Land cannot flee the jurisdiction. But it has never been implemented at scale in the United States.

For local government in rural Idaho, the realistic options narrow quickly. VAT requires central administration impossible at the county level. Land value tax is untested at scale. Income tax replacement raises the constitutional and structural problems discussed below. That leaves sales tax as the most frequently proposed alternative — and it is here that the problems become most concrete.

The Sales Tax Problem: Jefferson County Cannot Fund Itself

Sales tax is constitutionally permissible — unlike income tax, it did not require a constitutional amendment because the founders classified it as an indirect tax on transactions rather than a direct tax on persons. Hamilton actually favored consumption taxes at the federal level for this reason. So legally, a sales tax replacement for property tax is cleaner than an income tax replacement.

The problem is not constitutional. It is arithmetic.

Jefferson County does not have the commercial activity to generate sufficient sales tax revenue to replace property tax. Our retail base is modest. Residents shop in Idaho Falls. Online purchases increasingly escape local capture. Agricultural transactions — the economic lifeblood of this county — are largely exempt from sales tax. The tax base is simply too narrow.

This means that any sales tax replacement must be collected at the state level and distributed to counties by formula. And that is where we move from a tax problem to a governance problem.

The moment Jefferson County’s budget depends on what the Idaho Legislature decides to send us, we have traded fiscal autonomy for fiscal dependency. The Legislature can change the formula. It has done so before and will do so again, particularly during budget pressure. A county commissioner who has to go to Boise to fund basic services is not governing — he is administering someone else’s priorities.

Michigan is the cautionary tale. When that state’s revenues fell during the 2008 financial crisis, the Legislature reduced revenue sharing distributions to local governments. Cities and counties that had structured their budgets around those distributions faced structural deficits with no recourse. Detroit’s fiscal collapse was partly a product of exactly this dynamic.

The Anti-Federalist writer known as Brutus — writing in opposition to the Constitution’s centralization of taxing power — warned that fiscal dependency flows upward and becomes political control, regardless of what the formal legal structure says. He was writing about federal power over the states. The same logic applies to state power over counties. Once you are dependent on a higher level for revenue, your autonomy is surrendered in practice even if it is preserved on paper.

What Tocqueville and Bryce Saw

Two of the most penetrating observers of American democracy — Alexis de Tocqueville in the 1830s and James Bryce in the 1880s — both addressed local government finance, and what they saw remains relevant today.

Tocqueville observed that the New England township — the basic unit of American local self-government — derived its vitality from fiscal and administrative independence. Citizens who taxed themselves for local purposes, managed the expenditure of those taxes, and held their neighbors accountable for the results were practicing self-governance in the most direct sense. Remove the fiscal independence, and you remove the substance of self-governance even while preserving its forms.

Bryce, writing half a century later with a lawyer’s eye for institutional detail, made several observations that cut directly to our current debate. He noted that American local governments were financially autonomous in a way that had no European parallel — and he identified this autonomy as a structural strength, not a quirk. He also observed, with characteristic precision, that the proliferation of overlapping special taxing authorities — school boards, park commissions, water boards — obscured fiscal accountability because no single body was responsible for the total fiscal picture.

Bryce’s most pointed warning was about state legislative control of local finance. When cities needed state authorization to issue bonds or adjust tax rates, the authorization process became a vehicle for legislative favoritism and political manipulation. His preferred solution was constitutional home rule — guaranteed local fiscal authority that the Legislature could not casually override. Idaho’s home rule provisions are a direct descendant of that reform tradition. Any property tax replacement scheme must preserve what those provisions protect.

The Mandate Problem: The Cost Nobody Talks About

Any honest discussion of property tax and local government finance must confront a problem that property tax opponents rarely mention: a significant portion of local government spending is not locally chosen. It is mandated.

When the federal EPA sets a new water quality standard, Jefferson County must meet it. When the Idaho Legislature imposes new reporting requirements on county assessors or courts, Jefferson County must comply. When ADA accessibility upgrades are required for public buildings, Jefferson County must fund them. The decision to require is made by people in Washington or Boise who bear none of the cost. The bill comes to us.

This is a fundamental violation of a principle the founders understood clearly: the power to regulate and the responsibility to fund must reside in the same hands. When they are separated, regulation becomes costless to the regulator and expensive to the regulated. That is not republican government. It is taxation without representation wearing a different costume.

Any genuine reform of local government finance must address this directly. Every new state or federal rule that imposes costs on local governments should require either explicit appropriation to cover those costs, or an exemption for jurisdictions below a certain fiscal capacity. If the state or federal government wants something done, they should fund it. If they will not fund it, they should not require it.

The California Model: Capping Rather Than Eliminating

California’s Proposition 13, passed by voters in 1978, offers the most instructive American example of property tax reform — not elimination, but structural constraint.

Prop 13 capped property tax rates at one percent of assessed value and limited annual assessment increases to two percent per year, with reassessment to market value only when a property is sold or newly constructed. The result was stability and predictability for homeowners — particularly the fixed-income seniors and longtime residents who had been most hurt by rapidly rising assessments.

This model has genuine virtues for Idaho. Capping annual assessment increases would directly address the problem driving the elimination movement — the rapid, unpredictable growth in tax bills that forces people from homes they have owned for decades. It preserves the property tax as a locally-controlled revenue source while protecting homeowners from assessment volatility.

A cap system would also significantly reduce the workload of county assessors, since the labor-intensive annual mass appraisal process is largely replaced by assessment at time of sale. This raises a legitimate question about whether the elected county assessor position could be streamlined — or whether the function could be shared regionally among several counties at lower total administrative cost. Jefferson, Fremont, and Madison counties, for instance, might collectively support a regional assessment function more efficiently than three separate offices.

Prop 13 is not without its problems — it creates inequity between neighbors whose properties are assessed at dramatically different values based solely on when they were purchased, and it contributed to California’s chronic school funding difficulties by shifting fiscal power toward Sacramento. Idaho would need to learn from those failures while preserving what worked.

The Grocery Tax: A Study in Regressive Taxation

Idaho’s grocery tax deserves mention in any discussion of tax reform, because it illustrates the equity problems that plague consumption taxes generally.

Idaho taxes groceries at the full six percent state sales tax rate — relatively rare among states. To offset this, Idaho offers a Grocery Tax Credit of $120 per person annually. The intent is sound: collect the tax broadly, then rebate it to lower-income households. The execution has serious flaws. The credit only helps people who file Idaho income taxes. It has not kept pace with food price inflation since it was established in 2001. And it requires an administrative step — filing a return — that some of the lowest-income households don’t take.

A family earning $30,000 per year might spend 20 percent of their income on groceries. A family earning $150,000 per year might spend eight percent. The tax takes the same percentage of the purchase price from both — but a far larger share of the poorer family’s income. This is the definition of a regressive tax. If sales tax is to replace property tax, this regressive character becomes even more significant, because the base is now funding government broadly rather than merely applying to optional purchases.

What Genuine Reform Looks Like

I am not writing this to defend the status quo. Property tax as currently structured in Idaho has real problems. Rising assessments have outpaced income growth. The burden falls unevenly. The system lacks the predictability that homeowners and farmers need to plan their financial lives.

But the answer to a flawed system is reform, not replacement with something worse. Here is what genuine reform would look like:

Cap assessment increases. A Prop 13-style cap on annual assessment growth would directly address the volatility problem while preserving property tax as a locally-controlled revenue source.

Strengthen circuit breakers. Idaho’s property tax reduction program for seniors and disabled persons should be expanded and its income thresholds updated to reflect actual living costs.

End unfunded mandates. Every state rule that imposes costs on local governments should carry either appropriated funding or an exemption for smaller jurisdictions. The principle is foundational: if you require it, you fund it.

Pursue shared services and consolidation. Neighboring counties and districts performing the same functions independently should explore shared services — regional dispatch, cooperative purchasing, shared engineering and legal resources. Lower costs mean lower levies.

Reform the budget process itself. Local government budgets should distinguish clearly between locally-chosen expenditures and state or federally-mandated expenditures, so citizens can see exactly what their elected officials are choosing to spend versus what has been imposed on them from outside.

The Founders’ Wisdom

The founders’ insistence on keeping taxing authority as local and as visible as possible was not accidental. Madison argued in Federalist No. 45 that the powers of local self-government — closest to the people and most directly accountable — were the primary sphere of republican governance. That closeness only has meaning if local governments control their own revenue. A government that cannot fund itself cannot govern itself.

Property tax, for all its frustrations, is the most local and most visible tax that exists. You know what you are paying. You know who set the rate. You can vote them out. You can attend the budget hearing and argue against the levy increase. That directness and accountability disappears the moment you replace property tax with a share of a centrally collected state revenue stream distributed by formula.

The cemetery down the road from your farm is not maintained by Boise. It is maintained by your neighbors, funded by you, governed by people you know. That is what self-governance looks like at its most basic and most durable. It runs on a twenty-dollar line item on your property tax bill. Before we eliminate that bill, we had better be very sure we know what we are also eliminating.

I am open to reform. I am cautious about elimination. And I will always be honest with the people of Jefferson County about the difference.