The League of Women Voters of Idaho is launching a ballot initiative drive to lower Idaho's sales tax from 6 percent to 5 percent, while eliminating an array of exemptions and expanding the tax to cover most services - which would have the result of raising $424 million more a year that could be spent on schools.
If the measure makes the 2016 ballot, it'd give voters a chance to restructure Idaho's exemption-riddled sales tax system, which now exempts more in sales than the tax raises. But the League could have a tough sell in expanding the sales tax to services ranging from construction to legal advice to haircuts, and big-money interests may fight the loss of their existing exemptions.
“I applaud them – I think their heart is clearly in the right place here in terms of making a fair tax structure, but I think it’s going to be a really hard sell,” said Boise State University political scientist emeritus Gary Moncrief, an expert on elections and initiatives.
Idaho’s 6 percent sales tax currently raises about $1.5 billion a year in gross collections, according to the state Division of Financial Management; while the amount of exemptions, including existing exemptions for services, is tallied at more than $2 billion.“We’ve had a lot of trouble in this state getting exemptions closed in the past,” Moncrief said.
Repeated attempts by the state Legislature over the years to review existing sales tax exemptions have all failed; instead, lawmakers have continued to enact new ones each year. “Now, going to an initiative is certainly a much better way than going to the Legislature – there’s no way this is getting through the Legislature,” Moncrief said. “But they’re obviously going to be fought hard on that by a lot of pretty heavily monied interests in the state. And one of the things we know about initiatives is that money works best when it’s trying to defeat an initiative.”
The League’s initiative, entitled “Fair Share Idaho,” would eliminate 22 current sales tax exemptions on July 1, 2017, and subject 12 services to sales taxes. Targeted exemptions range from sales of funeral caskets, which would generate $1.6 million a year in sales taxes; to Idaho National Laboratory research and development purchases, at $6.2 million a year.
Others include goods purchased by contractors to install into real property in non-taxing states, $5.1 million; research and development equipment, $7.2 million; interstate trucks, $8.6 million; and remotely accessed digital media, $8.5 million. The initiative also would remove the sales tax exemption for lottery tickets; apply the tax to construction labor; and impose it on vending machine sales, auto manufacturer rebates and purchases by senior centers.
The biggest dollar amounts come from services that would be newly subject to the sales tax, including transportation of freight and passengers, $47 million; information services, $83.5 million; repairs, $48.2 million; professional services, including legal, accounting, architectural and consulting services, $254.4 million; and business services, $133.1 million.
Idaho already taxes some categories of services, including lodging, recreation, admissions, restaurant meals and printing. “Our members said sales tax exemptions for basic human needs should be protected,” said Betsy McBride, state advocacy chair for the League. Left untouched were sales tax exemptions for medical care, churches, home heating, and education.
“If they have an accountant or a personal massage therapist, there will be new sales tax,” McBride said. “But for the average Idaho family who spends most of their money on groceries, and shoes for their kids, and hamburgers, their tax is going to be lower.” You can read my full story here at spokesman.com; there’s more info here on the League’s initiative, including a full list of the targeted exemptions.