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Businesses get behind Idaho tax cut plan

Opponents have legislators’ attention

BOISE – No bill has even been introduced yet to repeal Idaho’s $141 million personal property tax on businesses. But one potential beneficiary aims to kick-start debate by putting its tax savings where its mouth is.

CenturyLink Inc., one of the state’s top 10 personal property taxpayers, would invest up to $2 million in tax savings in Idaho’s broadband infrastructure above the company’s existing plans if repeal succeeds, said Ed Lodge, the Monroe, La.-based company’s lobbyist in Boise.

This partially symbolic gesture seeks to show lawmakers that predicted economic benefits aren’t merely empty promises – and to overcome stiff opposition from counties, cities and public schools. The Idaho Association of Commerce and Industry, to which CenturyLink belongs, argues repeal would generate $6.19 in income for Idaho residents and businesses for every dollar lost to the state, according to its 2007 study.

“The business community has been consistent in its messaging that any savings would be used for economic development purposes, or put back in the business,” Lodge said.

Gov. Butch Otter has made repeal a top priority for the 2013 Legislature. His draft proposal would somehow find $90 million in new general fund revenue – ideally from projected economic growth – by 2020 to offset some of the loss, while shifting the remainder of the burden to local governments. Otter’s bill was circulated among legislators and others two weeks ago.

Sour reaction from counties, cities and school boards has been accompanied by criticism from Otter’s former chief economist-turned-chief critic, Mike Ferguson. They argue the state can’t afford to repeal property taxes.

Ferguson, now the Idaho Center for Fiscal Policy’s director, insists it would devastate Idaho’s 115 school districts because the burden of paying for future supplemental levies that many districts use to cover operations would shift to homeowners who pay local – not state – property taxes. Voters facing higher taxes would be less eager to support them, he said.

“As I hear, businesses want to have an educated workforce that is productive, and I already hear businesses complain they have a difficult time hiring qualified employees,” Ferguson said.

Most of the biggest potential tax-relief beneficiaries are Idaho Association of Commerce and Industry members. Idaho Power Co., Idaho’s biggest utility, is the biggest personal property taxpayer, at roughly $10 million to $15 million annually, according to state estimates.

Union Pacific Railroad is No. 2 at $5.4 million, while agricultural giant Simplot Industries and semiconductor maker Micron Technology Inc. pay some $3.3 million each. The bill for PacifiCorp’s Rocky Mountain unit equals about $3.1 million annually, followed by Century Link at $2.9 million.

Three gas-related companies, including Intermountain Gas Co. in Boise, pay about $1 million each.

Micron lobbyist Mike Reynoldson contends the century-old personal property tax is a relic of a bygone era that saps money from equipment-heavy companies like his regardless of profitability, and he argues that money could otherwise be invested in global competitiveness. Micron’s net loss widened in the last quarter to $275 million as demand slumped.

“It’s not based on how much that manufacturer consumes in services and it’s not based on the profitability of that taxpayer,” Reynoldson said. “It’s based purely on the fact that their business depends on a heavy capital investment.”

Jeff Malmen, Idaho Power’s top lobbyist, said regulated utilities would pass along savings to industrial, agricultural and residential customers via lower electricity rates.

That would make Idaho more attractive for companies to do business, said Alex LeBeau, president of the Idaho Association of Commerce and Industry.

LaBeau also believes local governments are exaggerating funding impacts.

Even personal property tax-dependent counties like southeastern Idaho’s Caribou and Power, with big phosphate-processing operations, would lose just 3 percent of total property tax income by 2020 under Otter’s proposal, according to IACI’s calculations. If necessary, they could make up losses by shifting the burden to homeowners.

Such “cocktail napkin calculations” invoke Association of Counties Executive Director Dan Chadwick’s ire, who contends LaBeau is overstepping his expertise by asserting how local governments can manage resources.

“They have no clue what it’s like to manage a county budget,” Chadwick said.

So far, House Speaker Scott Bedke, R-Oakley, concedes that local government concerns have resonated among lawmakers.

“They have been pretty effective,” Bedke said, assessing representatives’ mood.

Former Speaker Lawerence Denney, R-Midvale, was also frank about Otter’s proposal. “It’s getting some rough treatment,” he said.

The Republican governor isn’t giving up, however, with aides working on a revamped plan said to include $130 million in state replacement money over seven years.

“Anytime you start talking about changing tax structure, there are folks that are going to be nervous about it,” spokesman Jon Hanian said.