This could be the year the Legislature deals Idahos personal property tax a mortal blow. After years of political jockeying, Idahos powerful business lobby, the Idaho Association of Commerce and Industry, is pushing a bill to put the tax on business equipment and furnishings in its grave in six years. Idaho business groups and chambers of commerce want lawmakers to make a few other changes, too. Among them: More spending to lure new industries and keep existing ones. Easier terms to claim a tax credit for hiring more employees. Clarity on a health insurance exchange.
1. THE PERSONAL PROPERTY TAX
Charles Alpers cant stop paying for equipment he buys to run his business, Zeppole Baking Co. in Boise. Once he shells out money for tables, chairs, bread racks or ovens and pays sales tax on the purchases he keeps on paying in his annual business personal property tax bill.
This year, the bill was $1,100. Since 2006, about the time Alpers and his wife, Alison, bought the company, theyve paid $9,000 in personal property tax, enough to buy a new oven for bread baking.
Alpers says it takes him a couple of days each year to go through his personal property to make sure the bills list of items is accurate.
I put if off as long as I can, Alpers says. Its a weight around our ankles.
The tax forces businesses to inventory and assign values to everything from machinery to chairs.
The tax needs to go away, says IACI President Alex LaBeau, for what must be the thousandth time.
This year, LaBeau has other powerful people in his corner. Senate President Pro Tem Brent Hill, R-Rexburg, expects the tax will be cut. House Majority Leader Mike Moyle, R-Star, said last year that it was time to repeal the tax. And Gov. Butch Otter, fresh from backing state income-tax rate reductions, climbed on board in June.
Idaho chambers of commerces have been in IACIs corner for some time, saying the tax is a nightmare to administer and a drag on business. One attempt at reforming the tax was passed in 2008 and would exempt $100,000 in personal property taxes for businesses over five years if revenue grew 4 percent or more. But that hasnt happened.
[Businesses] hate paying the property tax each year on something they have already bought and paid sales tax for, says Anne Little Roberts, executive director of the Meridian Chamber of Commerce.
This year, IACI is proposing a plan that would immediately end the tax on new equipment purchased by business and phase out of the tax on existing equipment over six years.
But theres a problem: That would pull an estimated $140 million out of the revenue stream for local governments and public schools. Their dependence has kept the tax alive.
Even the chambers say it is important to protect local governments from severe cuts. For example, the Nampa Chamber of Commerce says it supports a partial or gradual repeal of the tax when there are sources of revenue to ensure public services are not severely impacted, says Debbie Kling, chamber president and CEO.
Otter has warned that his upcoming budget doesnt have money to make up for the shortfall, says Mark Warbis, the governors communication director.
Personal property accounts for 9 percent of property taxes statewide. But the burden varies widely, from 7 percent in Ada County to 45 percent in Caribou.
Among those making the most noise about lost tax revenues are educators. Many school districts make bond payments that depend on revenue from property taxes, including the personal property tax. Reducing the revenue base could force schools to raise taxes on real property, including homes and business buildings. Its one of those tax shifts to homeowners, says Rob Winslow, executive director of the Idaho Association of School Administrators.
Winslow worries that raising tax rates would make it tougher for schools to pass bonds, some of which already require a two-thirds majority for passage.
LaBeau says some provision as yet undefined may have to be made to cover bond payments. But hes less sympathetic to the argument that future bond sales would be hurt. If schools make a strong case for their bond sales, voters will pass them, he says. They need to be able to go out and justify the bond in the first place, LaBeau says.
2. MONEY FOR ROADS
Businesses see a potential economic bonanza in completing the extension of state highway 16 as a limited-access highway from State Street south to Interstate 84. A portion of that work State Street to Chinden Boulevard is under way, with an expected cost of $140 million. The second part, a four-mile section from Chinden to I-84, would cost an estimated $350 million. Because funds are short, that work isnt even on the Idaho Transportation Departments five-year plan.
Completing that stretch could open much of the undeveloped area to economic development and provide another route to north Ada County besides clogged Eagle Road.
The Boise Metro Chamber of Commerce backs a plan to create economic districts along highways such as Idaho 16 to divert a portion of the sales taxes collected from businesses to help pay for the construction.
This is a creative solution whereby economic growth created by a new road would ultimately pay for itself, says Bill Connors, chamber president and CEO.
A similar program is being used for improvements at the intersection of Eagle Road and Fairview Avenue in Meridian. Developers put up money to pay for the cost and will recover it through a sales tax diversion. The proposed zones would be capable of paying for costlier projects.
The state must find a way to pay for more infrastructure, says Jeremy Pisca, a lawyer representing the Idaho Association of Realtors and supporting the plan. Attempts to raise revenue through gasoline tax and vehicle registration havent succeeded, he says.
You can stick your head in the sand and not build roadways, Pisca says. We need to get ahead of growth.
3. MORE MONEY TO ATTRACT AND KEEP BUSINESSES
Lawmakers increased their financial support for economic development last year with a $5 million down payment on the Idaho Entrepreneurial Global Mission IEGM aimed at turning college and Idaho National Laboratory research into startup companies.
That largely overshadowed a proposal from economic-development groups to create a separate $5 million fund. The fund would provide money the state could use to close deals on new companies or to keep existing ones in Idaho.
The Boise Chamber and its industrial recruitment arm, the Boise Valley Economic Partnership, are backing a similar idea this year.
An increasing number of companies are checking out the Treasure Valley, but while Idaho often makes it into companies top three choices for new sites, the state lacks the deal closer that could propel it to No. 1, says Clark Krause, executive director of the partnership. Money would be used to reward companies that add new jobs.
Requirements a business must meet and the additional money it receives for meeting them would be disclosed publicly. The fund would be controlled by the Idaho Department of Commerce, with dollars doled out to companies based on their performance in bringing new jobs to the state, Krause says.
Just a few more tools can make a huge difference for the state in what we would be able to do to get to the finish line, he says.
4. CLEAN UP THE EMPLOYEE TAX CREDIT
In 2011, as Idahos unemployment rate nudged up against 9 percent, the Legislature passed the Hire One Act, a tax credit for companies that hired people. But the law is complicated and the governors office has heard from businesses that it is hard to use. The law sunsets in 2013, and there is still no clear data on how it has been used. Idahoans wont know how many companies used the act until they start filing state tax returns this year, because of requirements for how long an employee must be on the job before a company can claim the credit.
Several chamber groups are pushing for an extension and simplification of the law. Otter is proposing changes. Among them:
Ease the wage minimums for companies to qualify for the credit. Hire One requires that jobs pay $12 an hour in counties with unemployment rates of 10 percent or higher and $15 an hour for counties with lower rates. Otter would reduce the jobless-rate threshold to 8 percent. Annual average unemployment for Ada County is 8 percent. For Canyon, it is 10.8 percent.
End the requirement to provide health insurance that pays at least 80 percent of the premium for single coverage and 70 percent for families. The provision would be replaced by the federal Affordable Care Acts mandatory health insurance requirements.
In addition to a tax credit, Idaho would give an extra $1,000 to companies that hire veterans.
5. A STATE-RUN HEALTH EXCHANGE
Businesses announced their support for a state-backed health insurance exchange before last years legislative session. Their reasoning hasnt changed. They say a state plan, whether run by the state or a nonprofit organization with a board appointed by the governor, would keep health information in the state and minimize the federal governments role.
Last month, Otter announced his support for a nonprofit exchange. That could be heavily debated in the Legislature, where skeptics like House Majority Leader Mike Moyle, R-Star, say Idaho should have as little to do with the Act as possible.
Just days after Otter announced his decision, opponents took to the Statehouse steps to oppose a state-based exchange, even if it is a nonprofit organization. Wayne Hoffman, executive director of the Idaho Freedom Foundation and an Affordable Health Care Act opponent, says Otters decision makes the national effort of resistance (to the health act) much more difficult and more likely the law will remain in place, at great cost to Idaho families, businesses and our nations economic vitality.
Bill Roberts: 377-6408. Twitter: @IDS_BillRoberts