A Computable General Equilibrium Analysis of a Property Tax Limitation Initiative in Idaho

Abstract

Idaho voters rejected a property tax limitation initiative in 1996. Before the election, proponents claimed the decrease in revenues would be offset from the increase in economic activity. We developed a computable general equilibrium model based on tradable and non-tradable sectors to hypothesize the impact on Idaho’s public finances, household income, and economic growth, with and without the initiative’s tax policy. The model predicts that each $3 reduction in property tax revenues would result in an overall $2 loss in state and local revenues. The benefits are predicted to be $35 per low-income household and $738 per high-income household. The federal government would receive 1% additional revenues from Idaho. (R51)