BOISE - A temporary tax break for homeless shelters that had unanimously passed the Idaho House went down to unanimous defeat in a Senate committee Tuesday, as the debate over how to deal with Idaho’s myriad tax exemptions intensified.
Idaho’s exemptions and exclusions from its state sales tax - including the exclusion of services from the tax - exceeds the amount the tax collects. But numerous efforts over the past decade to review and repeal existing exemptions have fallen short, amid opposition from the businesses and groups that get the breaks.
“I appreciate the good work of these and other groups that want to reach out and provide that very necessary help,” said Sen. Joe Stegner, R-Lewiston. “The problem is that this conflicts with some very fundamental challenges in my opinion that Idaho has, and that basically is a lack of a clear policy direction on how we hand out the favors of state government - this is the power of government to tax or not tax.”
Rep. Branden Durst, D-Boise, told the senators his exemption was different from existing tax breaks - it’s temporary, just for two years; it targets a specific need, as homeless shelters are overflowing due to the economic downturn; and it’d save the state money to have the shelters house more people with their savings from not having to pay sales taxes on toilet paper, oatmeal and paper towels for two years.
His pitch won strong favor earlier in the House, which passed the bill, HB 435, on a unanimous, 70-0 vote.
But Senate committee members said they just couldn’t support continuing to pass individual sales tax exemptions, and that they can’t say that one charity is more deserving of a tax break than another.
“Everybody said we’re going to have to make some tough decisions - this is one of those days,” said Sen. Mike Jorgenson, R-Hayden Lake. “I can’t discriminate as far as who has greater need, and I won’t. But I want to offer my strongest support and thanks to you who are taking on this glorious work - it needs to be done.”
He urged people to donate to the shelters to help in their time of need.
Senate Tax Chairman Brent Hill, R-Rexburg, said, “Ultimately, it’s just not the desire of the committee to continue to expand sales tax exemptions until or unless we’re willing to look at the whole group of them, and try to come up with some criteria for determining who should get the exemptions and who should not - rather than just who gets the favors and who doesn’t.”
Durst’s bill would have cost the state just $15,000 a year for two years. Five non-profit homeless shelters around the state, including one in Bonner County, would have qualified for the exemption.
The Senate committee’s vote came just hours after Congressman Walt Minnick had addressed the Senate and House and urged the appointment of a bipartisan commission to review the state’s sales tax structure and its budget situation, with a “straight-up yes or no vote in the next legislature” on the panel’s solutions.
“I think that’s something worth looking at,” Hill said. “I didn’t think it was a bad suggestion.”
Minnick, in his talk to lawmakers, stressed bipartisanship as the answer for finding solutions; he’s the lone Democrat among Idaho’s four-member congressional delegation. The Idaho Legislature is 75 percent Republican.
Asked if he thought the heavily GOP Legislature was receptive to his pitch for bipartisanship, Minnick said, “I hope so - that’s the only way you get things done in the national legislature or this one. It leads to a better mix of ideas and more middle-of-the-road solutions, all of which are in the public interest.”
The Senate panel’s rejection of Durst’s bill also came less than an hour after it backed introduction of a bill proposed by Sen. Chuck Winder, R-Boise, to require the Legislature to review all sales tax exemptions at least once every five years, and to make any new ones enacted after July 1, 2010 expire after five years unless specifically extended.
That came on the heels of two similar measures already introduced: HB 396, from Rep. Wendy Jaquet, D-Ketchum, would set up a commission to review all existing sales tax exemptions at least every eight years; and SB 1277, a bill sponsored by seven Senate Democrats, would make all state tax exemptions, credits and deductions expire on Jan. 1, 2012, unless specifically extended by state law; and would require all new exemptions to expire in five years.
Stegner, however, noted that such attempts in the past have failed. “There is, in my opinion, a significant barrier to try to do that in that manner, because you have a tremendous amount of pressure from the people that enjoy the exemption, and no offsetting opinion particularly from the rest of the state,” Stegner said. “So it gives the impression that there’s just tremendous, wide support across the state for the exemption, when in fact you’re listening to a pretty small group of folks.”
Two years ago, a joint legislative committee worked through the summer to develop standards against which tax breaks should be measured, and recommended repealing several. However, only one repeal passed, for a corporate headquarters incentive that never had been used.
Idaho’s existing sales tax exemptions include some for specific charities or types of businesses, and others that are broader. Taxing services would raise the most money, but Idaho hasn’t taxed services since its current sales tax was established in 1965. Advocates of re-examining that say the state’s economy has changed, and most of its transactions now involve services rather than goods.
Hill said Minnick’s proposal may be the answer. “I think that’s probably the only way that we’re going to be able to accomplish what needs to be accomplished,” he said. “Obviously, we have not been successful at chipping away at them one at a time.”