Session closes in compromise

BOISE – With a compromise on a tax break for businesses, Idaho legislators on Wednesday finally wrapped up their business for the year and adjourned the session.

“I think it’s a good compromise – it’s a better bill,” said Rep. Jim Clark, R-Hayden Lake.

In some ways, the session that started with grand plans ended with something of a whimper. Gov. Butch Otter, who laid out an ambitious initiative to increase transportation funding, lost two-thirds of it; he was out sick Wednesday and had no comment. Proposals for teacher merit pay, day-care licensing, election consolidation, state employee retirement benefit changes and more all went down to defeat.

But the session did see long-sought legislation pass to increase the tax credit that offsets what Idahoans pay in sales tax on groceries; make dog fighting a felony; and regulate the impact of field-burning smoke on public health.

Transportation funding issues that were supposed to dominate the session instead gave way in the final week to the debate over the business tax break, which sought to phase in a $120 million-a-year tax break for Idaho businesses by eliminating the property tax on business equipment. Otter halted the transportation funding debate when he rejected a House proposal for $68.5 million in increased gas taxes and fees, saying it simply wasn’t enough.

The giant tax break for businesses was amended by the Senate to transform it into an exemption from the tax for up to $75,000 in value in business equipment. That would have cost the state just $15.5 million a year, and freed 86 percent of Idaho businesses from paying the tax at all.

But the House rejected the Senate plan.

Wednesday’s compromise, developed by a conference committee convened to hash out differences between the House and Senate, would exempt up to $100,000 in value in business equipment. The measure also includes an economic “trigger,” saying the tax break won’t take effect until state revenues rise by 5 percent from one year to the next.

House members also insisted on another change, to grant the exemption only once per county for each taxpayer, rather than for each business site. That means multiple grocery stores owned by the same chain, for example, would get just one exemption.

“I’m very, very surprised at the House’s approach,” said Senate Tax Chairman Brent Hill, R-Rexburg, “since I thought they were coming to expand the exemption. Now they limited it more in what they’re asking for here.”

Clark, who served on the six-member conference committee that Hill chaired, had earlier said he wanted “all or nothing” on the tax break. But on Wednesday, he said, “I’m not sure if that was a good choice of words. … We’ve got to have something. We just can’t keep saying no.”

The new economic trigger may mean a delay in when the tax break takes effect, depending on next year’s economy. “We may have to wait two or three years before this kicks in,” Hill said.

The amended bill would have a $17.4 million annual cost to the state when it takes effect, all of which the state would pay to counties to make up for their lost property taxes on business equipment due to the new exemption. Local governments wouldn’t lose anything in the process, and the exemption on up to $100,000 in value of business equipment would free 88 percent of the state’s businesses from paying the tax entirely.

“I appreciate everyone’s attitude,” said Sen. David Langhorst, D-Boise. He said when other senators heard he’d been appointed to the conference committee, they told him they didn’t envy him. But, he said, “I find it a great place to be, and we should meet more often like this.” Amid laughter, he added, “And maybe we should have the transportation issue in here right now and fix that one.”

The compromise bill then went before both the Senate and House, where it passed unanimously. It now goes to the governor’s desk.

Clark told the House, “This is a good bill, should pass,” as his entire debate on HB 599 as amended, and the House greeted him with applause. The bill then passed 65-0. At that, the House adjourned for the session on its 87th day at just after 4:30 p.m., and the Senate followed about two hours later.