Three bills to repeal tax breaks clear panel
BOISE – The push to re-examine Idaho’s plethora of tax exemptions and tax breaks has dwindled to just three bills that would repeal three tax breaks.
Meanwhile, new tax breaks are still being discussed, including two to entice a French company to build a uranium enrichment plant in eastern Idaho and one that would give Idaho businesses a $100 million property-tax break.
The surviving bills to end some exemptions, which cleared a House committee Wednesday, would repeal a tax incentive for corporate headquarters located in Idaho, a tax credit for research and a credit for broadband investments. None targets sales tax exemptions, which in Idaho now exceed the amount collected by the tax. Legislators say the discussion isn’t over, but the three bills are as far as it will go this year.
“Is this the end of the process? Absolutely not,” said House Tax Chairman Dennis Lake, R-Blackfoot, who co-chaired a special joint committee over the summer that recommended a sweeping review of Idaho’s tax exemptions. “We will continue to work to clean up the tax code.”
But Lake noted it’s the end for this legislative session in his committee, which is the panel that introduces all new tax legislation.
The committee also voted Wednesday to introduce a measure proposed by Rep. Nicole LeFavour, D-Boise, to set standards for which nonprofits should receive sales tax exemptions, rather than require each to come separately to the Legislature seeking a break. Though the bill was introduced, it likely won’t advance any farther this year. LeFavour said she plans to continue to work on it.
Rep. Leon Smith, R-Twin Falls, praised LeFavour for her work on the bill. “We really need to have some criteria,” he said. “Right now, it’s so political.”
But House Assistant Majority Leader Scott Bedke, R-Oakley, disagreed, saying the House committee is the best “filter” for tax exemption proposals.
“The good things, by our definition, will get through, and the bad things won’t,” Bedke said. “The committee’s doing a good job, it seems, and there’s no need for this legislation.”
State projections show Idaho is expected to collect roughly $1.4 billion in sales taxes in fiscal year 2009, which starts July 1, but $1.79 billion will be exempted through existing tax exemptions or credits.
Over the summer, a joint legislative committee called for a review of Idaho’s tax breaks, set up criteria by which to evaluate them, and broke them down into three “tiers” in order of priority for review. The three bills that Lake persuaded his committee to approve Wednesday repeal three of the breaks from the top-priority tier.
He proposed a half-dozen others regarding sales tax exemptions early in the session, but the committee refused to consider or review any of them. Lake this week proposed repealing a sales tax exemption for broadcast equipment, but decided not to pursue that one. “We’ll deal with all of those at another time,” he said.
The three repeals deal with income and property taxes. Lake said they’re important because other new tax breaks, such as two just approved by both houses to try to entice Areva, a French company, could overlap them. “We could get into a situation where people could double-dip,” Lake said.
House Majority Leader Mike Moyle, R-Star, asked Idaho Association of Commerce and Industry lobbyist Alex LaBeau what he thought of the corporate headquarters incentive repeal. “We have not taken a position on this piece of legislation,” LaBeau responded. “There is another piece of legislation pending in the House that is of more interest to my membership,” he said, so the business lobby isn’t concerned about the re-examination of the three tax breaks.
The bill that has the association’s attention is HB 599, which would repeal the personal property tax on business equipment. It would phase in a $100 million-plus property tax break for Idaho businesses.
That bill has been held up on the House calendar for several days due to serious constitutional problems identified in an Idaho attorney general’s opinion letter. Later Wednesday, the House approved several amendments designed to address the constitutional problems.
The House refused, however, to go along with a proposed amendment to cut the value of the break to just over $9 million by limiting it to the first $50,000 in personal property for each business. That would have exempted 80 percent of the state’s businesses from personal property tax.
The corporate headquarters incentive was designed to keep the Albertson’s grocery store chain based in the state, but it was never used and the company was sold to Minnesota-based SuperValu.
Lake said the broadband credit is no longer needed, and the research credit passed in 2001 also is no longer necessary.
“Companies do research because it is good for the company, not because you’re going to get a 5 percent tax credit,” Lake said.
The three repeal bills now move to the full House for consideration.