Business gets 1 of 3 wishes in 2014 Idaho legislative session

Idaho lawmakers pass just one of the tax breaks sought by influential lobbies.

zkyle@idahostatesman.comMarch 22, 2014 

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IDAHO STATESMAN GRAPHIC

  • Status of other business bills at a glance

    Many of the bills passed by the Legislature await Gov. Butch Otter's signature. The governor has yet to veto a bill from this legislative session.

    Farm surveillance ("ag-gag"): The controversial bill outlawing secret filming of animal abuse on Idaho farms is now law.

    Cloud services sales tax: A bill further defining what Internet-based products and services are and aren't subject to sales tax awaits the governor's signature. Even if it becomes law, the Legislature may have to consider the issue again next year, because of unresolved disagreements over the interpretation of the bill.

    Payday loans: A bill that limits the amount of a payday loan to 25 percent of the borrower's monthly income and provides for extended payment plans awaits the governor's signature.

    Film production incentive: A bill that prevents expiration of a law allowing for 20 percent rebate on money spent on TV and film productions in Idaho awaits the governor's signature. The rebate program remains unfunded.

    Inmate labor: A bill permitting Idaho farmers to hire prison inmates for minimum wage during labor shortages has passed the Legislature and awaits the governor's action. The program, which was prompted by fruit spoiling during a worker shortage in 2013, is voluntary for inmates.

    Wastewater permitting: A bill championed by Idaho Association of Commerce and Industry to shift wastewater permitting from the federal to state government is now law. The bill will cost $300,000 to begin stepping up staffing in the Department of Environmental Quality. The annual cost could grow to $2.5 million by 2022 if the Legislature continues funding the expansion.

    Instant racing: A bill that would allow race tracks to install machines on which patrons could gamble on historic horse races failed in the House State Affairs Committee.

    The nonstarters: As expected, lawmakers didn't introduce any bills that would expand Medicaid or increase transportation spending.

  • IDAHO’S TAX BURDEN

    Idaho had the second-lowest tax burden per person in the nation in 2011, 30.7 percent below the national average, according to the most recent report from the Idaho State Tax Commission. For specific taxes, here's how Idaho ranked. First is the heaviest burden, 51st the lightest:

    Tax • rank • % difference from national average

    Property tax • 41 • -39.3%

    Sales tax • 38 • -22.5%

    Individual income tax • 33 • -19.3%

    Corporate income tax • 29 • -31%

    But Idaho's relatively low income means the state's overall tax burden relative to income is just 13.5 percent below the national average. Idaho ranks 41st in the nation overall. Relative to income, here's how Idaho ranked:

    Tax • rank • % difference from national average

    Property tax • 38 • -24.3%

    Sales tax • 27 • -3.2%

    Individual income tax • 26 • +0.9%

    Corporate income tax • 24 • -13.8%

    Source: Idaho State Tax Commission

Even the powerful and well-connected can't always get everything they want.

Two of the most influential business lobbies in the state, the Boise Metro Chamber of Commerce and the Idaho Association of Commerce and Industry, headed into the legislative session for three major tax breaks.

But when the gavel ended the session Thursday, lawmakers had passed only a tax reimbursement for businesses that generate at least 20 new jobs in rural areas or 50 in cities.

Even with allies in both the House and Senate, lobbyists' efforts to roll back income-tax rates and to increase the personal property tax exemption died quietly when committee chairmen declined to schedule hearings on them.

IACI President Alex LaBeau said he's disappointed with the lack of progress in his lobby's long-term goal of eliminating all personal property taxes, which are collected on most property that isn't land or buildings, including equipment and furnishings.

Last year, lawmakers passed a bill exempting the first $100,000 worth of personal property from the tax in each Idaho county where a business operates. This year, lawmakers considered legislation that would have expanded the exemption to $250,000, leaving only 5 percent of businesses paying any tax.

The personal property tax revenue goes to counties and cities. Last year, the Legislature replaced the $18 million local governments would have collected before the exemption.

"There needs to be a plan to finish the tax off," LaBeau said. "It's an inherently unfair tax. Local government has to come to grips with that, as well as the state if they want to truly do what's right for business."

A bill would have reduced the corporate income tax rate, a flat, region-leading 7.4 percent, by a tenth of a percent each year until it reached 6.8 percent. The top individual income tax rate, which now is 7.4 percent, would have been reduced at the same pace to a top rate of 6.8 percent.

Co-sponsored by Mike Moyle, the powerful House majority leader from Star, the bill passed the House. But Senate Local Government and Taxation Committee Chairman Jeff Siddoway, R-Terreton, declined to schedule a hearing on it.

Bill Connors, president and CEO of the Boise chamber, said the tax reimbursement bill was a victory. The bill allows the Department of Commerce to negotiate with companies to pay back up to 30 percent of their payroll, sales and corporate income taxes for up to 15 years if they agree to create jobs paying more than the average wage in the county of operation. Gov. Butch Otter is expected to sign the bill into law.

Connors said the program has little risk for the state because companies wouldn't receive a dime until jobs have been created. "We didn't get everything we wanted, but we're extremely excited about the tax-reimbursement bill," he said. "We think it's a great example of an incentive where no money changes hands until jobs are actually created and there's no loss to the state at all."

Some lawmakers hoped to make greater progress on tax relief, including Siddoway.

Siddoway supported expanding the personal property tax exemption. He said he regularly met with Senate and House leaders, House Revenue and Taxation Committee Chairman Gary Collins and tax experts from the Idaho State Tax Commission to discuss the personal property tax, corporate income tax rates and reducing or eliminating the grocery tax.

Siddoway said participants found little common ground and derailed each other's bills.

"We had a lot of meetings throughout the session, and every time we met, we had different ideas proposed on tax relief," Siddoway said. "... Quite frankly, I'll take the responsibility of saying no to a good deal of that."

The cost of tax breaks was a big reason, he said. Expanding the personal property tax exemption figured to cost at least $8 million a year. The bill rolling back income taxes would have cost $21 million in its first year.

Siddoway said the two proposals couldn't coexist with the Legislature increasing K-12 education spending by $66 million next year.

One of the lawmakers in those talks, Senate President Pro Tem Brent Hill, R-Rexburg, said he had expected tax relief bills would make more headway.

"The problem really was in the competing nature of the bills," Hill said. "We've got some who really want to look at income tax reductions and others who think we need to continue with personal property tax, and then there's the majority of the Legislature feeling like we just can't afford to do both."

Zach Kyle: 377-6464, Twitter: @IDS_zachkyle

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