February 7, 2007 in Idaho

Otter’s grocery tax plan rejected

Betsy Z. Russell Staff writer

BOISE – Gov. Butch Otter’s targeted grocery tax relief bill went down to defeat in a House committee Tuesday, which instead passed a different measure to raise the grocery tax credit for all Idahoans.

“I had a problem with the governor’s bill,” said Rep. Dick Harwood, R-St. Maries. “My problem is it’s a Robin Hood scenario – take from the rich and give to the poor. The middle class needs some help, and this was going to cut the middle class out.”

Otter’s bill, HB 80, sought to give a big tax break on groceries to low-income Idahoans – up to $90 a year. But the break would phase out as incomes rise, with higher-income families getting no credit.

The House Revenue & Taxation Committee instead voted 14-4 to pass HB 81, sponsored by Rep. Cliff Bayer, R-Boise, and a long list of lawmakers, including 10 from North Idaho. HB 81 would raise the grocery tax credit for everyone to $50 a year, up from $20. For seniors, the tax credit would double to $70. The bill would cost the state an additional $47.5 million a year in lost sales tax revenue, more than twice as much as the governor’s $22 million plan.

Two pricier proposals to reduce or eliminate the sales tax on groceries also were passed over in favor of HB 81.

Senate Tax Chairman Brent Hill, R-Rexburg, said he was “very pleased” with the House committee’s decision.

“I like the bill,” Hill said. “Out of the four, that was the one I wanted to have pass.” He added, “I was not happy with the governor’s proposal. I felt like it was taking a tax rebate and turning it into a welfare program.”

But Hill said he’s not sure the state can afford the price tag on HB 81, and it may have to be altered – particularly if lawmakers also want to enact a business tax break now being pushed by the Idaho Association of Commerce and Industry, to phase out the personal property tax on business equipment.

Otter’s press secretary, Jon Hanian, said after the House committee vote, “We’re waiting, we’re watching, but he believes that his proposal is the most fiscally prudent that can also help the people who need it most.”

The motion to reject the governor’s bill, which passed on a voice vote, called for the measure to be held at the call of the committee chairman. That leaves the door open to a possible resurrection of the bill later.

Rep. Dennis Lake, R-Blackfoot, chairman of the committee, said, “I think the governor knew that his proposal had some objections built right into it, because it was not only a tax relief measure, it was also a tax increase built into the same bill for some people.” Higher-income people who now get a $20 annual grocery tax credit would’ve lost it under the governor’s bill.

Otter’s chief economist, Michael Ferguson, had told the committee a day earlier that if it wanted to keep the current $20 credit for everyone on top of the governor’s proposal, that would cost just $11.5 million more than the governor’s plan, or $33.5 million a year. Lake said after the committee’s vote that he was surprised that option wasn’t brought up. Hill said it was “another idea, and we may just look at another idea. We have that option.”

Rep. Nicole LeFavour, D-Boise, tried to amend the governor’s bill to expand the income categories receiving the credit and remove a prohibition on any food stamp recipients receiving the credit, but that move failed on a voice vote. The committee then voted to hold the governor’s bill and send HB 81 to the full House in its place.

Rep. George Sayler, D-Coeur d’Alene, voted with the majority on both those moves. “I appreciate the intent to give the relief to the low-income people, but when we raised the sales tax, everyone got hit with that,” Sayler said. Lawmakers raised the sales tax in August from 5 percent to 6 percent.

House Majority Leader Mike Moyle, R-Star, who also voted to reject the governor’s bill and pass HB 81 instead, said, “We just improved on it a little bit. That’s not a defeat; that’s a win for the governor.”

Lake said the bill may change when it hits the Senate. House Assistant Majority Leader Scott Bedke, R-Oakley, agreed. “Not very many of our bills get through there the same, do they?” he asked.

To become law, the bill still needs approval from the full House and Senate and the governor’s signature.

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