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Eye On Boise

Tax exemptions in campaign spotlight; Risch blasts Allred

Here's a news item from the Associated Press:  BOISE, Idaho (AP) — Grappling with Idaho's $1.7 billion worth of sales tax exemptions is becoming a centerpiece in the 2010 race for governor. U.S. Sen. Jim Risch, a Republican supporter of Gov. C.L. "Butch" Otter, upped the ante this week by lending his name to a partisan attack on Democrat Keith Allred. Risch blasted Allred in a mailer — paid for by a business lobby — saying Otter's challenger would repeal millions in tax cuts and kill thousands of jobs. In fact, Allred has been pushing to end some of the $1.7 billion worth of tax exemptions he says benefit well-connected special interests to the exclusion of other Idaho taxpayers, then using the revenue to reduce Idaho's overall tax rate. He contends the roughly 130 exemptions enacted since 1965 include some that succeeded only because one industry had a better lobbyist than another. Click below for a full report from AP reporter John Miller.

Idaho's Risch goes on attack against Allred
By JOHN MILLER, Associated Press Writer

BOISE, Idaho (AP) — Grappling with $1.75 billion in sales tax exemptions has become a centerpiece of the Idaho governor's race.

U.S. Sen. Jim Risch, a Republican backer of Gov. C.L. "Butch" Otter, lent his name to an attack on Democrat Keith Allred. In a mailer to 30,000 homes this week paid for by the pro-business Idaho Association of Commerce & Industry, Risch said Allred wanted to repeal millions in tax cuts, a move Risch contends could "kill thousands of Idaho jobs."

In fact, Allred has been pushing to end some exemptions he says benefit well-connected special interests to the exclusion of other taxpayers. He would use resulting revenue to reduce Idaho's overall tax rate.

"He won't raise a dollar of new taxes," said Shea Andersen, Allred's spokesman. "Every dollar saved by closing tax exemptions that don't make sense will go, dollar for dollar, into a reduced base rate that will boost small businesses."

Allred has pledged to protect some big exemptions, including for equipment used in manufacturing, processing, mining, fabrication or logging, calling them "fundamental" to making a sales tax system work.

But he contends some of the 129 exemptions enacted by the Legislature since 1965 succeeded only because one industry had a better lobbyist than another. He brings up the tax break for ski resorts on new lifts while campaigning, but he won't say just which ones should go, saying Idaho residents should determine those that have outlived their usefulness.

Idaho has about 50 exemptions each worth at least $1 million annually, including funeral caskets, about $1.3 million; Idaho National Laboratory expenditures, worth some $4.5 million; and the two largest, health and medical services for $397 million and services like those provided by lawyers for $180 million.

At a forum last week, Otter said getting rid of them would disenfranchise businesses counting on a break. He also contends that smaller exemptions — the ones that may seem ripest for repeal — wouldn't yield enough cash "to wad a shotgun."

"I have signed one exemption in the four years I've been governor," Otter said last week. "All those other exemptions were put into place for good reason, and there was good deliberation on those by the tax committees."

Even so, finding repeal proponents isn't hard.

The Tax Foundation, a 73-year-old Washington, D.C.-based group, estimates Idaho could cut its sales tax rate by a tenth of a percent for every $20 million in exemptions it dumped. Its 2009 report ranks Idaho's business tax climate 18th, with states like Utah faring better.

"The more riddled a tax system is with politically motivated preferences, the less likely it is that business decisions will be made in response to market forces," the group wrote.

Still, Alex LaBeau, lobbyist for the business group paying for Risch's attack, characterized Allred's proposal as "just a shell game that would raise taxes."

LaBeau said he would have to investigate exemptions one by one, to see if any merit abolishment. But he's convinced that when they were passed, there was sound economic justification — not just a powerful lobby with the Legislature's ear, as Allred contends.

Idaho's legislative record shows shedding even innocuous exemptions has been no picnic — despite support from some Republicans.

In 2010, a Senate measure calling for review of tax exemptions was shelved by the House — without a hearing.

And two years earlier, the House Revenue and Taxation Committee refused to dump several small exemptions, including for funeral homes and ski resorts. The argument often goes like this: Tax breaks spur investment that otherwise wouldn't happen.

As a state senator, Risch voted for numerous tax exemptions. Promises like Allred's to repeal some of them are a dime a dozen during election years, but they go unkept, he said.

"Do you know how many exemptions have been repealed?" Risch said. "Not one. History tell you it's never going to happen."

Copyright 2010 The Associated Press.

Betsy Z. Russell
Betsy Z. Russell joined The Spokesman-Review in 1991. She currently is a reporter in the Boise Bureau covering Idaho state government and politics, and other news from Idaho's state capital.

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