State panel re-examining tax break policies
BOISE – State Sen. Brent Hill says he’s not against tax breaks – as a CPA, he’s spent a career searching them out for his clients.
But as the chairman of the Senate Tax Committee, Hill, R-Rexburg, said he recognizes that the exemptions, credits and deductions that Idaho lawmakers have piled willy-nilly into the state’s tax code over the years aren’t making taxes lower. Instead, they’re making the state’s tax system unfair, shifting the burden from one taxpayer to another and forcing overall rates up.
“I’m in agreement that we need to control government spending, but I don’t think that’s what we’re accomplishing with many of these exemptions and so forth,” Hill told the first meeting Wednesday of a joint legislative committee that’s charged with re-examining Idaho’s entire system of tax breaks. “We’re merely shifting the burden to the other taxpayers.”
The 14-member legislative committee, with members from both houses and both parties, started a series of all-day meetings at which it will hear from tax experts, Idaho interest groups, local government officials, business lobbyists, economists and advocates. After three days of sessions this week, it’ll reconvene for more in October. The aim is to offer recommendations when the Legislature convenes in January.
“I think it’s about time, after 11 years, that we try to solve this problem … the issue of what an exemption should be,” Rep. Jim Clark, R-Hayden Lake, told his fellow committee members. Clark, who’s in his seventh term in the House, said Idaho should develop some kind of standard against which every exemption is measured.
Other members said the state should eliminate unnecessary exemptions and tax breaks in order to lower overall tax rates.
Sen. David Langhorst, D-Boise, said if the panel decides that all current tax breaks should remain, “At least we and the Idaho public will know why our sales tax is 6 percent, and not 5, 4 or 3 percent.”
Hill, who is co-chairing the interim committee with House Tax Chairman Dennis Lake, R-Blackfoot, said he has no desire to increase state revenue. Instead, he said, the panel should re-examine the tax system solely to make it more fair, equitable and effective.
As he spoke, an audience heavy with lobbyists listened closely. Many of the same lobbyists have argued, often successfully, over the years for tax breaks for their clients.
“Obviously we’re going to look at whatever might come out of this group and the impact it will have on our ability to do what we do, and tax policy is a big part of that,” said Jack Lyman, executive vice president and lobbyist for the Idaho Mining Association.
“You can’t eliminate tax breaks without creating tax shifts.”
Hill noted that Idaho’s sales tax started with 17 exemptions; it now has more than 80. Lawmakers have added 13 business tax credits to the state’s income tax code, each requiring a separate form. They’ve mandated more than 20 adjustments to federal income.
“We as legislators have granted almost every credit that anybody’s asked for over the years,” Hill said.
Lake noted that the panel will need to reach two-thirds agreement to recommend any changes to the Legislature. “I hope that all of the committee members come to the table with an open mind to do what’s best for the state of Idaho,” he said.
The tax panel begins its work in an especially charged atmosphere, as the state’s largest private employer, Micron Technology, continues layoffs. The Boise-based high-tech firm already has laid off about 10 percent of its work force and announced plans to outsource another 5 percent.
Micron and another major Boise-based company, Albertsons, pushed for big tax breaks from the Legislature two years ago to make it more attractive for them to expand and remain in Idaho. But then Albertsons was sold and broken up, and Micron hit a downturn that’s prompted big layoffs and talk of expanding overseas instead.
At the same time, the Legislature has unfinished tax business: Lawmakers and Gov. Butch Otter failed to reach agreement this year on a plan to cut sales taxes on groceries, something both have made clear they consider a high priority. Also, a major business lobby continues to press for a $100 million personal property tax break for businesses, which passed the House last year but failed in a Senate committee.
Rep. Bill Killen, D-Boise, drew chuckles when he said the joint committee will provide a much-needed “cultural exchange between the House and the Senate.”
A similar panel four years ago failed to agree on anything, but at the time then-House Tax Chairwoman Dolores Crow, R-Nampa, and Senate Tax Chairman Hal Bunderson, R-Meridian, sharply disagreed over whether changes were needed.
Rep. Dell Raybould, R-Rexburg, said, “I think it started up a lot of thinking about the exemptions, and I think this committee may be a culmination of that effort.”
Lyman said his clients want to know how tax policy will affect an investment over, say, the next five years – and not have that change. “I’ve got folks that want to make $150 million investment decisions,” he said, citing the proposed expansion of the Lucky Friday Mine.
“Tax policy becomes an important factor in making those investment decisions. I’m going to resist anything that makes a substantial shift onto the folks that I represent.”