The City’s Pulse Newsletter

By Mary Souza, March 27, 2008

The wonderful humorist, Mark Twain wrote that “The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.” I feel his pain. And there could be much more pain ahead for those in our area. Not only is our federal and state income tax day right around the corner, but our school district is asking for a $31.1 million dollar levy and there’s talk of another jail bond coming soon as well. Pouring salt on this taxation wound, North Idaho College is considering the use of forgone taxes to purchase land for the Education Corridor. They hold the right to $2.6 million in foregone taxes.

Now, as voters, we have a voice on the school levy and jail bond issue, but when it comes to foregone taxes, we’ve got nothing. And what in the heck are foregone taxes, anyway? Most people have no idea, so let’s go over the basics.

Here’s a great explanation of foregone taxes, written by my friend Dan Gookin:

“Taxing entities in Idaho can budget for the following year using this formula:

Highest of the last 3 year’s budgets + new construction values + 3% = maximum budget for following year

So say a taxing entity has had previous years budgets of:

$900,000
$1,000,000
$1,100,000

They can set the next year’s budget to $1,100,00. Then they add in the value of new construction on the property tax rolls. Say that’s another $100,000, so you have $1.2M for next year’s budget. They don’t have to, but they can take up to 3% over that: $1.2M x 3% = $36,000. So the next year’s budget can be as high as $1,236,000.

When they don’t take the full 3%, it becomes “foregone.” Not gone-gone, but foregone. Which means gone but not forgotten. Every year that they don’t take the full 3%, they get to have that “remembered.” So if they don’t take 3% for 3 years in a row, they have stockpiled a 9% increase in foregone.

Yeah, that would hurt when times are tough.

By taking foregone they obviously increase their budget. They can then use that higher budget to base higher budgets for the years to come. It never goes away. They find a way to spend it instead of cutting back and giving the taxpayer a break.”

Thanks, Dan, that’s a clear but frightening report on a complex subject. It brings to mind the chagrin of political humorist PJ O’Rourke, when he said “Giving government money and power is like giving car keys and whiskey to a teenage boy.”

The general thought about foregone taxes is that they should be held for emergencies only; they’re not for optional projects or ongoing basic costs. (I think they should get rid of them entirely, but that’s just me.)

NIC is not the only taxing entity holding foregone taxes, though they are the only group to have cashed them in recently. They took foregone a few years ago for salary increases and many people were outraged because it seemed an inappropriate use. The purchase of the mill site does not appear an emergency either.

Hold onto your wallets, people, because Kootenai County also holds $2 million in foregone taxes and the City of Coeur d’Alene has $1.1 million in foregone. We can only hope they use great caution and restraint. The natives are restless.

Feeling a bit overwhelmed right now? Maybe you should take heed of the old Beatle’s song, “Taxman!” It goes like this:

Let me tell you how it will be;
There’s one for you, nineteen for me.
‘Cause I’m the taxman,
Yeah, I’m the taxman…

If you drive a car, I’ll tax the street;
If you try to sit, I’ll tax your seat;
If you get too cold, I’ll tax the heat;
If you take a walk, I’ll tax your feet.

Taxman!

Have a nice day.