House passes bill to replace property tax with utility sales tax

On March 6, 2025, the Idaho Legislature convened for its 60th legislative session, where a significant discussion centered around a proposed tax reform affecting utility companies. The proposed legislation aims to replace the current property tax system with a new tax structure based on energy consumption, specifically kilowatt hours and therms.

The primary focus of the debate was whether this new tax would ultimately be passed on to consumers. Legislators discussed how the replacement tax would function similarly to existing property taxes, allowing utilities to adjust their rates through the Public Utilities Commission (PUC). Proponents argued that this change would provide a more consistent revenue stream for the state and simplify the tax assessment process for utilities. They emphasized that the new tax would not increase the overall tax burden but would merely shift it from property taxes to utility bills.

Critics raised concerns about the potential for incremental increases in utility bills, reminiscent of past experiences with phone bills that saw small, frequent hikes. They questioned whether consumers would notice these changes and how the tax would be distributed among counties, especially since utilities operate across multiple jurisdictions.

Supporters of the bill countered that the new tax structure would ensure that the revenue collected would be fairly distributed based on historical data, thus maintaining equity among counties. They highlighted that the tax would be clearly indicated on consumer utility bills, ensuring transparency.

As the debate concluded, the bill's sponsor reiterated that the reform was necessary to prevent future tax shifts that could burden other taxpayers if utilities continued to face legal challenges regarding property tax assessments. The session ended with a call for a vote on the bill, which is expected to have significant implications for both utility companies and consumers in Idaho.

This legislative move reflects ongoing efforts to modernize the tax system in Idaho, aiming for greater efficiency and fairness in how utilities are taxed and how those costs are ultimately borne by consumers. The outcome of this bill could set a precedent for future tax reforms in the state.