Ben Davenport, president of Associated Taxpayers of Idaho, a business group, ran through a long list of possible goals that lawmakers might have in changing state tax policy, including providing a stable funding source for education. “If your goal is to find a more stable funding source for education purposes, we need to kind of look back,” he told lawmakers on the Tax Working Group. “Obviously, in 2006 the Legislature made the decision to move away from the maintenance and operations (property tax levy) and shift the burden of funding schools onto the general fund.” A penny was added to the Idaho sales tax, but wasn’t dedicated specifically for schools, he noted.
“The first year, it provided about $100 million in property tax relief,” Davenport said. “Unfortunately, it was short-lived for the taxpayers. That relief, after two years it was surpassed and utilized by other taxing districts. And we were back to the 2006 levels by the 2008 tax year – not only that, we were also straddled with the sales tax ongoing to help funding schools.”
Over 10 years, available funding for education dropped significantly, he said. “Whether it was intended or not, the penny sales tax wasn’t dedicated, and this gap was not only created but it widened. So then what happens? The property taxpayers were once again straddled with the burden to fund schools. Right now it looks like we have about 80 percent of our schools have supplemental levies, and it’s somewhere in the $180 million range. So what the taxpayer’s looking at, we get to hear biannually from schools about how we need to pass a levy. And then we get to hear from you all every year in the annual fight to pass an appropriation that’s half our general fund. So it becomes never-ending discussion for the taxpayer on school funding.”
Davenport also talked about Idaho’s “three-legged stool,” in which revenue to run state and local government is roughly equally balanced between sales, income and property taxes; and how to make Idaho more business-friendly. “While income tax is certainly important, it’s not where most businesses in Idaho would start the discussion,” he said. “We all know that it’s overall tax burden, regulatory environment and workforce. … Although Idaho’s corporate income tax is a 7.4 percent rate, the effective rate is much lower. It may be much more difficult of a discussion to have than simply saying we want to trade a few credits to lower the rate. So in reality, I think for most of the businesses that are members of my association, making Idaho more business friendly may involve other portions of the tax burden. We all know that the major one is the personal property tax, we’ve been discussing it for a long time. Most of us believe that it’s an unfair tax on business.”
He said, “We need to look at this from a full tax burden view. So while it should certainly be part of the discussion, I don’t think income tax needs to be the only place we look for efficiency and reform.”