House approves tax break for businesses

BOISE – A divided Idaho House approved a $100 million-plus a year property tax break for businesses Friday, with North Idaho representatives split on the measure.

The bill, HB 599, would phase in a repeal of the personal property tax on business equipment. It passed on a 39-31 vote after much debate, and now moves to the Senate.

Rep. Jim Clark, R-Hayden Lake, the lead sponsor of the bill, told the House, “The issue is this will stimulate the economy.”

The measure would phase out the property tax on business equipment, which is called a “personal property tax,” as distinguished from tax on real estate. The state would reimburse counties for the loss, eventually costing the state general fund more than $100 million a year. Most of the benefit – more than 90 percent – would go to the top 16 percent of the state’s businesses.

Opponents said the measure would result in a tax shift to other property taxpayers and difficulty in funding basic state operations including education, health and welfare programs and prisons. The question of whether the business tax break would hurt other property taxpayers loomed large in the debate on the bill.

Rep. Dell Raybould, R-Rexburg, said businesses would get an economic boost from the tax break that would “encourage new employment in the state, which means more houses,” and eventually more property taxes. He added, “This whole thing is not going to take the counties down – they’re going to get the money from the state.”

But Rep. John Rusche, D-Lewiston, said, “22 percent of the taxable property in Nez Perce County is personal property.” That tax base grows by about $5 million a year, he said, while the bill would replace it with a flat amount that would never grow.

“That … is going to have to get shifted to the residential property owners,” Rusche said. “Although I dearly love the large corporations in my district, I think it’s going to be very difficult to explain” to residents why they should pay for the companies’ tax break.

“This is going to be very damaging to local government in areas that have a high proportion of personal property,” Rusche said. “This really is not a good idea at this time.”

Rep. George Eskridge, R-Dover, said the bill would shift taxes. “I have to vote against this bill and the ultimate consequences of a $100 million-plus loss to our revenue stream,” he said.

Rep. George Sayler, D-Coeur d’Alene, said his local county assessor told him the bill’s wording could inadvertently redefine boat docks as no longer being real property, causing huge tax consequences in Kootenai County. “Phasing out the personal property tax may be a good idea, but I don’t believe that this is the time or that this is the bill to do it,” Sayler told the House.