Some level of personal property tax relief seems inevitable this session, although the details might not be set until the final day of the session, and lawmakers may hold their noses when approving it.

Lobbying groups have sought to eliminate the tax on business equipment and furnishings for years, but the Legislature has never been willing to pull the trigger.

That’s partly because the effect on cities, counties, school districts and other local taxing jurisdictions is so significant. The tax brings in $141 million per year, paying for everything from police and fire protection to weed control, urban renewal and highway maintenance.

With the economy on the upswing, however, there’s growing support for eliminating all or part of the tax.

Gov. Butch Otter and Republican leaders say that should be done “without doing harm to local governments” — but among legislators, “doing no harm” seems to be shifting to doing something and hoping it’s as harmless as possible.

TAX COMMITTEE CHAIR HAS QUESTIONS

“I’d call it ‘negotiated harm,’ “ says Rep. Gary Collins, R-Nampa, chairman of the House Revenue and Taxation Committee. “I think something will be done this session, but right now there are more questions than answers. As for ‘harmless,’ it may be a totally different definition for the Legislature than it is for the cities and counties.”

Dan Chadwick, executive director of the Idaho Association of Counties, thinks some kind of full or partial exemption will be approved this session. The question is how much and how harmless it ends up being.

“I think the counties will have a lot to say about that,” he says. “We have a responsibility to provide certain mandatory services — we can’t say no. I think the Legislature and governor are well aware of the damage that would be done by just eliminating the tax without backfilling that revenue.”

Counties collect almost $40 million per year from the personal property tax. If that went away, Chadwick says, there are three basic options for minimizing the effect on county budgets: replace the local revenue with a direct payment from the state, shift responsibility for certain programs from the counties to the state, or eliminate programs altogether.

“If they don’t do one of those three things, they aren’t holding counties harmless,” he says.

Counties pay $20 million per year to provide public defenders. Indigent health care costs about $30 million, most of which would go away if the state accepts the proposed expansion in Medicaid eligibility by the federal government. Either of these could become a source of revenue to pay for personal property tax relief.

LOCAL OPTION? NO, COUNTY LOBBYIST SAYS

Chadwick says the governor’s proposal to replace the tax with a local-option tax is not a viable solution. It gives voters the opportunity to increase local taxes to pay for certain services, but doesn’t free counties from the obligation of providing those services regardless of how the vote turns out.

Another solution would be to allow local jurisdictions to recover the lost revenue by raising real property taxes on homes and businesses, but there seems to be little support for that alternative.

“If it’s a zero-sum game and we’re just going to find a new group of people to pay the ($141 million), I don’t know that that’s necessarily progress,” says House Speaker Scott Bedke, R-Oakley.

HOUSE LEADER: WE’LL KNOW HOW MUCH AT SESSION’S END

House Majority Caucus Chairman John Vander Woude, R-Nampa, agrees, saying lawmakers were elected to represent taxpayers, not cities and counties.

“I think what most citizens worry about is a tax shift,” he says. “That might hold cities and counties harmless, but it doesn’t do citizens any good.”

Vander Woude says personal property tax relief will likely be one of the last bills approved during the session.

“The extent to which we can do anything depends on how much money is left over (after approving agency budgets) and we won’t know that until the end,” he says.

If a tax shift isn’t an option and lawmakers don’t completely abandon the local jurisdictions, then a direct state appropriation is the most likely solution. That means a phased or partial approach to property tax relief, since the state doesn’t have enough money to eliminate the entire tax this year.

SPEED UP THE 2008 LAW?

“I think all we have to do is pull the trigger on the 2008 agreement. I’d be happy as a clam about that, and it does very little harm,” says Sen. Dan Schmidt, D-Moscow.

Lawmakers approved a $100,000 personal property exemption in 2008 that would have eliminated the tax for almost 90 percent of Idaho businesses. It was delayed pending state revenue growth, but lawmakers could move the exemption forward. It would cost about $20 million — which, coincidentally, is the amount the governor set aside for tax relief in his 2014 budget recommendation.

Sen. Dan Johnson, R-Lewiston, supports a big-picture approach to any tax policy changes. He’d like to review existing tax exemptions and credits that collectively cost the state more than $1.7 billion in revenue each year, and see if they still make sense.

“As hard as we’re pushing for personal property tax relief, we should be pushing equally hard to review and simplify our tax code and broaden our tax base,” he says.

Senate Majority Leader Bart Davis, R-Idaho Falls, says most years he can project a likely path forward on major bills. Property tax relief is proving too complex for that, “but in the years I’ve been here, I’ve never seen a collective desire greater than this year to engage on an issue.”

HILL: WE COULD STILL BACK OFF FROM RELIEF

Senate President Pro-Tem Brent Hill, R-Rexburg, says there’s still an opportunity to back away from tax relief this session, if a viable solution can’t be found.

bspence@lmtribune.com (208) 791-9168.