The House Revenue & Taxation Committee today killed Sen. Dan Johnson’s alternative tax-cut bill, dumping the Senate tax chairman’s proposal with only one vote in favor of the bill – from House Minority Leader Mat Erpelding, D-Boise.

Johnson’s bill, HB 558, took Gov. Butch Otter’s big House-passed tax cut bill as a starting point, but made several changes: Instead of a $130 per child, non-refundable tax credit, it kept the $4,150 dependent exemption that federal changes would otherwise eliminate, thereby boosting the resulting tax cuts for large Idaho families. To make up the difference, it cut personal and corporate income tax rates by 0.3 percent instead of Otter’s proposed 0.475 percent, and refrained from conforming with one other federal tax change, on a business tax break regarding net operating loss carry-backs. Johnson said no state has conformed to that 199A change; Idaho would be the first to do so. Johnson called that break “a carve-out with few economic benefits,” and said pass-through business entities already are getting substantial tax breaks. “There’s little justification for providing pass-through businesses this generous reduction,” Johnson said. “This is a tax policy that picks winners and losers and is not stable.”

Johnson estimated that not conforming to that business break - which he said essentially duplicates a break already in Idaho law - would save the state $46.9 million a year, while keeping the dependent exemption would cost the state $139.5 million. All told, his bill offered $193.3 million in total tax relief, with a net impact on the state general fund of $95.9 million.

House Majority Leader Mike Moyle, R-Star, spoke out against the move on the 199A conformity. “I appreciate what the good senator’s trying to do in this bill here, but I have a real concern,” Moyle said. “The one thing it takes out, the 199A, is the one thing that benefits all the pass-throughs and small businesses. … We punish those who create the jobs with this bill. I think we need to conform for 199A. … The majority of the people work for smaller businesses and pass-throughs.”

Rep. John Gannon, D-Boise, said, “I think that Sen. Johnson has done a very, very intensive and very good job at trying to put something together that works. The problem for me is this reduction in general fund revenue. … That is probably not going to be adequate, considering the tremendous growth that we have,” he said. “It’s going to be real tight.”

Erpelding cast the only “yes” vote for the bill; every other committee member opposed it, killing it.

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