Arrow-right Camera

ID Government

Otter sends warning: He still opposes repeal of Idaho’s grocery tax

UPDATED: Wed., Dec. 6, 2017, 5:33 p.m.

Idaho Gov. Butch Otter drew a line in the sand Wednesday, warning that he’s still firmly opposed to removing Idaho’s 6 percent sales tax from groceries.

Last year, lawmakers passed legislation to do just that – by a two-thirds margin – and Otter vetoed it. Lawmakers sued, ending up before the Idaho Supreme Court, but failed to get the veto overturned.

“I hope we don’t have to go through what we went through last year, because I feel very certain that that is probably the most stable and predictable (state revenue) source that we have,” Otter told the Associated Taxpayers of Idaho annual conference, a traditional run-up to Idaho’s legislative session that’s attended by hundreds of lawmakers, business people, lobbyists and state and local government officials.

“And not only that, folks, think of it this way,” Otter said, “It’s the tax that everybody pays.”

Idaho is one of just seven states that fully applies its sales tax to groceries; most of its neighboring states don’t tax groceries at all, while Utah taxes them at a reduced rate. Idahoans get a roughly $100-per-person tax credit on their state income tax returns each year to offset part of the cost.

Eliminating both the sales tax on groceries and the credit would reduce Idaho’s state tax revenues by a net figure of about $79 million a year.

Otter’s strong statement on the grocery tax got mixed reviews from top legislative leaders who were in the audience.

“If we want to have a repeat of last year, we don’t need him to support it,” said Senate President Pro-Tem Brent Hill, R-Rexburg.

That’s because last year’s veto came too late for a veto override, which both houses of the Legislature can pass by a two-thirds vote. But lawmakers passed the bill so late in their session this year that they had adjourned for the year before the measure hit the governor’s desk.

Hill said senators have been telling him since last year’s fight that “we need to run that early, and then if we need to override, we’ll override.”

He added that he voted against the bill last year. “I’m not personally opposed to it, but I didn’t like the process,” Hill said. “I think we need to have public hearings.”

Instead, a House-passed bill to cut income taxes was transformed by amendments in the Senate into a grocery-tax elimination bill at the end of the legislative session, and passed amid bitter late-session political fights.

Hill said if the measure went through a full hearing process, including analysis of its impacts on all Idahoans, it might or might not win such strong support from the Legislature.

“I think we will be better prepared to make that decision this year, because we’ll have better information,” he said.

House Speaker Scott Bedke, R-Oakley, said he was more inclined to focus during the upcoming 2018 legislative session on areas “where we do have consensus.”

He noted that while Otter and the business lobbying group Idaho Association of Commerce and Industry both spoke against the elimination of the grocery tax at the taxpayers association conference on Wednesday, all three major GOP candidates for governor who are vying to succeed Otter, a Republican who will retire after his third term ends next year, told the same group they favored repealing the grocery tax.

“The grocery tax credit negates the sales tax on food for most Idahoans,” Bedke said.

He said “if that ends up being the will of the body,” and lawmakers want to push the repeal over a veto from Otter in the 2018 session, “The majority ends up winning and two-thirds end up really winning. But I’d hate to see us come to that. I’d like to see our efforts in all these other areas where there is general agreement.”

That includes the idea of cutting Idaho’s income tax rates – another move that all three GOP candidates backed in their comments to the group on Wednesday, as did IACI.

Bedke said he’s not a fan of exemptions or exclusions from the sales tax. “Here’s what I think,” he said, “If we were able to collect all the sales tax that is due, including online purchases, then you have the luxury of lowering the rate because you have a broader base.”

Otter, for his part, said his top priority for the 2018 legislative session will be education, including the fifth year in the five-year plan for major school improvements that were recommended by his education task force. “I’m going to continue with that commitment,” he said.

He also hinted that he’ll propose major changes in higher education in Idaho, after convening a task force on that topic last year.

“I’m going to be going to the Legislature to structurally change exactly how we run higher education in the state of Idaho,” he said, in hopes of moving the state closer to its goal of having 60 percent of its residents between the ages of 25 and 34 go on for more education after high school; that figure is now closer to 40 percent.

Otter said a better-educated workforce would be a boon to the state’s economy, as workers could earn higher wages. “If we reach 60 percent, folks,” he said, “that’s worth $400 million to our pool of taxpayers.”

Otter also announced during his Associated Taxpayers speech that he’s appointing state Rep. Janet Trujillo, R-Idaho Falls, to the state Tax Commission, which means she’ll step down from her House seat. Trujillo, who is married to House Majority Leader Mike Moyle, will serve a six-year term on the commission; she replaces former Commissioner Rich Jackson, who retired in September.

After pointing out Trujillo in the audience and calling her “your new tax commissioner as of right now,” Otter said amid laughter. “So you all knew before she did, and certainly before her husband.”

Trujillo, a third-term state representative, is a certified tax appraiser for eastern Idaho’s Bonneville and Jefferson counties.

Otter will name Trujillo’s House replacement from among nominees offered by the GOP committee for Trujillo’s legislative district.