Calling it another improvement in Idaho’s already business-friendly tax climate, Gov. Phil Batt signed into law an immediate $31 million cut in the tax Idaho businesses pay for unemployment insurance.
“This could be the most important legislation we pass this year,” House Speaker Michael Simpson said Wednesday at the signing ceremony in Batt’s office.
The bill, part of the retiring Republican chief executive’s final legislative program, cleared both the House and Senate unanimously.
It was the first piece of legislation to reach the governor’s desk this session.
The lower tax rates will benefit all but the handful of businesses with the worst layoff records and will total more than $113 million in cash which employers will keep to themselves over the next four years.
“We have an extremely competitive business taxing arrangement in Idaho,” said Batt, citing the state’s 3 percent investment tax credit, relatively low property taxes and favorable regulatory climate. “So when businesses look for a place to settle because of taxes, Idaho is very, very competitive.”
Reducing the unemployment tax was among recommendations last year from a special task force, including representatives of labor and business. Batt had directed the panel to come up with a new taxing schedule that would maintain the integrity of the trust fund that compensates idled workers while still reducing the burden on the 36,000 businesses that employ 400,000 people.
The balance in the trust fund hit more than $330 million by the end of 1997 despite tax cuts in 1985, 1987, 1989 and last year.
Lawmakers expedited action on the latest reduction proposal because the Labor Department has been delaying since late December sending the jobless tax notices to employers.
Even with the latest reduction, the Idaho tax rate is still a tenth of a percentage point higher than the national average. And with state benefits still running substantially higher than the national average, organized labor’s role in last year’s negotiations was to protect those benefits against any erosion.
Representatives of the AFL-CIO joined leaders of the Idaho Association of Commerce and Industry, the Idaho chapter of the National Federation of Independent Business and others in hailing the new law on Wednesday.
It includes a 16 percent increase in the minimum weekly jobless benefit. But it also requires workers to earn more money to be eligible for unemployment pay, which could render several hundred low-wage workers who now qualify ineligible.