3 tax breaks get ax, for now

BOISE – Idaho should do away with its investment tax credit and with special tax breaks for ski areas, broadcasters and publishers, a joint legislative committee decided Monday.

But the panel may undo those groundbreaking votes today, in favor of a more comprehensive look at a longer list of the state’s tax breaks.

“There was a degree of frustration,” said House Tax Chairman Dennis Lake, R-Blackfoot.

That’s because all three votes to eliminate tax breaks were closely split, with House Republicans opposing them, and senators and House Democrats favoring them.

A proposal to eliminate a popular income tax credit for certain Idaho charities failed on a tied vote.

Senate Tax Chairman Brent Hill, R-Rexburg, said, “We have to have both (houses) to make it work, so why try to shove something down their throat?”

The joint legislative committee, including members of both houses of the Legislature and both parties, is charged with reviewing Idaho’s myriad tax exemptions, credits and deductions this summer. Four years ago, a similar panel failed to agree on any recommendations.

But this year’s group wants action. After spending three days in August reviewing all Idaho tax breaks, the panel invited members to name exemptions or tax breaks they thought should be reconsidered, along with criteria for judging whether they should continue. A compilation of their suggestions added up to more than 30 exemptions worth more than $118 million a year.

When the panel started working down the list Monday to consider which exemptions to eliminate, Sen. Joe Stegner, R-Lewiston, suggested doing away with all.

“Then we could have a discussion about putting things back in,” Stegner said. “There’s been from many a recognition that the state has gone too far in awarding exemptions in the past.”

A recommendation from the committee to dump a long list of exemptions would prompt “a re-evaluation of the tax structure,” added Stegner, who said that would be “very healthy.”

But his proposal failed on a 5-7 vote.

Rep. Jim Clark, R-Hayden Lake, voted in favor.

“After 12 years I would like to see us do something with exemptions, that’s all,” Clark said. “Let’s at least take a shot at ‘em.”

But when the committee began voting on individual exemptions, Clark voted to keep each one. “One of ‘em I helped get on the list,” he said ruefully. “Let’s give ‘em all a shot to come in and talk to us about it.”

A large audience of lobbyists – many of whom successfully pushed for enacting the exemptions now on the chopping block – listened closely.

The panel considered four existing tax exemptions, and voted to eliminate three of the four. Here’s how the votes came out:

•On a voice vote with only a couple of dissenters, the committee voted to recommend that the Legislature end the sales tax exemption for ski lifts and snow-grooming equipment. “All other entertainment is subject to sales tax in the state of Idaho,” Hill said. “Golf courses, miniature golf, amusement parks – everybody else has to pay sales tax on their equipment as they purchase it. I see no logical reason why this thing should be carved out.” Ski resorts would lose a $600,000 a year tax break.

•On a 7-5 vote, the committee voted to recommend doing away with Idaho’s 3 percent investment tax credit, which has been on the books since 1982 and is now worth $41 million a year. However, it said businesses that already have earned the credit should be able to continue to carry it over into future years; they just couldn’t claim new credits. Because the credit has a 14-year carry-over term, that would mean it would take 14 years to phase it out.

•By the same 7-5 split – with all five House Republicans on the panel voting no, and all the senators plus two House Democrats voting yes – the committee voted to recommend ending two sales tax exemptions for the media dating back to the 1970s. A 1975 exemption for broadcast equipment and supplies worth $2.6 million would end, as would a 1979 exemption for publishing equipment and supplies for free newspapers worth $165,000 a year.

•The panel failed on a tied vote to call for eliminating the state income tax credit for donations to the Idaho Youth Ranch and certain other youth rehabilitation organizations. Stegner said the groups are worthy organizations and donations to their thrift shops already qualify for the tax deduction for charitable donations. The credit costs the state $10.5 million a year.

“The trouble is that they’re not the only organizations in the state that do that,” Stegner said.

Hill agreed. “This is just a matter of fairness. There are some that have caught the ear of the Legislature, and others have not.”

The legislative committee took a lunch break after that tied vote, and by the time its members reassembled an hour and a half later, they were talking about other ways to approach the problem besides a series of close votes.

Rep. Dell Raybould, R-Rexburg, said, “Maybe we can be a little innovative, and have a joint subcommittee of the Senate and the House” review exemptions during the next legislative session. “I think we can review it in fairly short order.”

But Lake said he thought the special joint committee was charged with doing that review – not just leaving it for others.

Raybould then proposed that the committee come up with a prioritized list of which exemptions should be re-examined, arrived at by following a list of criteria about what makes good tax policy.

The panel had spent time in August talking about such criteria, and even developed several possible lists of criteria. Hill offered to combine the lists into one for consideration at the panel’s meeting this morning.

Raybould’s motion passed on an 11-1 vote, with just Rep. Nicole LeFavour, D-Boise, dissenting.

Clark asked if the committee wanted to repeal its earlier votes to do away with three existing tax exemptions, but Lake said, “Not today.”

Both Lake and Hill, who are co-chairing the joint committee, said the difficulties the panel is encountering show how hard it is to repeal tax breaks once they’re law. Those who benefit from them will fight to keep them.

Said Hill, “I think we come a long way if we can agree on some criteria.”

Possible criteria the lawmakers discussed for judging tax breaks include equity and fairness, simplicity, neutrality and appropriateness.

Committee members also said they have no plans to raise taxes overall in Idaho. If tax breaks are eliminated, they said any increased tax burden should be offset, possibly through expanded grocery tax credits and a personal property tax break that next year’s Legislature is expected to consider.