SUN VALLEY — Gov. Butch Otter acknowledged that his position has shifted since the 2012 legislative session, when he approved a cut in the income tax rate instead of the Idaho Association of Commerce and Industry’s top priority.

Cutting income taxes had to come first, Otter argued, because it covered a broader segment. “In order to help the economy, we needed to help the entire economy,” he said.

The next step, Otter said, is phasing out the $129 million personal property tax, which provides about 11 percent of property tax revenue statewide.

“I want you to know my commitment to the personal property tax and the reduction and eventual elimination of that is undaunted,” Otter said to applause at the group’s annual public policy conference.

‘STARS ARE ALIGNED’

House Majority Leader Mike Moyle said the time has come for repeal, and said a draft bill is already circulating for the 2013 Legislature.

“We’re on the verge of getting something done here that will be beneficial to everybody,” said Moyle, R-Star. “It’s something we need to get done and be done with it. The stars are aligned now.”

IACI has pressed for years to repeal the tax on equipment and other nonreal property, which is considered an administrative nightmare by many businesses.

Senate Majority Leader Bart Davis, however, said the state budget is unlikely to be robust enough to replace $129 million in lost income to local governments.

Though the average proportion is 11 percent, four of Idaho’s 44 counties receive more than 25 percent of their property tax revenue from the personal tax. It supports all levels of local government reliant on property taxes, most of which are collected on assessments of land and structures.

“I couldn’t agree more that that’s a priority,” said Davis, R-Idaho Falls. “But if the solution today is that the state of Idaho will provide an economic reimburse-ment to the counties. ... I don’t know how we have the dollars to do that.”

LIFTING THE CAP?

Davis suggested giving local governments other concessions, saying one idea could be lifting the 3 percent cap on property tax growth. “If we are all pointed to that goal — and I am, too — the devil’s in the details and we do have to make it work,” Davis said.

Two other House leaders who join Moyle on the House Revenue & Taxation Committee — Assistant Majority Leader Scott Bedke, R-Oakley, and GOP Caucus Chairman Ken Roberts of Donnelly — agreed that repeal is a priority.

Bedke said the question of whether to make local governments whole will drive the debate.

BOOSTING ECONOMY

IACI’s LaBeau was pleased with the remarks.

“I think you have a clear indication that in terms of tax policy, that’s the No. 1 issue to deal with in the next legislative session,” LaBeau said.

As for refilling local government coffers, LaBeau said, “I don’t know if you have to replenish the dollars.” The tax could be phased out over five years and “nobody would notice,” he said.

During the 2012 session, LaBeau argued that eliminating the tax would be the best thing lawmakers could do to spur economic growth.

Instead, the Legislature and Otter cut the top rates for corporate and personal income tax by 0.2 percent at an estimated cost of $35.7 million, with the personal relief going to the top 17 percent of tax filers.

The 2008 Legislature enacted a personal property tax repeal bill covering assessments up to $100,000. But repeal was contingent on 5 percent budget growth, a figure that’s not been met since.

Earlier, the tax was repealed on agricultural equipment, and Moyle said the Legislature has an obligation to remove the tax on all businesses.

Dan Popkey: 377-6438, Twitter: @IDS_politics