Idaho currently has 141 “tax expenditures,” the state’s chief economist, Derek Santos, told lawmakers on the Tax Working Group this morning. Those are tax breaks – exemptions, exclusions, credits or deductions. “We keep track of all of these,” he said. Forty-six of those are breaks from the income tax; 95 are from the sales tax. “This is current as of last legislative session,” Santos said, when “two more were added – they are included in this count.”
The total of all of the tax expenditures: A $2.32 billion annual impact on the state’s general fund. The income tax breaks account for $0.36 billion of the total; sales tax expenditures add up to $1.97 billion. “It’s almost $2 billion dollars,” Santos said.
“We do estimates for every one of these 141 expenditures,” he said. Estimates for the income tax expenditures are the most reliable, Santos said, “because we have good historical data. I can get reports from the Tax Commission that tell me exactly how much we paid out. … It forms a really good basis for me to look at.” The total for sales tax expenditures includes goods not taxed, services not taxes, and entities not taxed.
“The estimates we are presenting is a measure of what we think the potential is out there,” Santos told the lawmakers. “They do not represent the amount that would be collected if the deductions, exemptions, exclusions and credits were repealed. ... We think it would be less, because one of the things you’re going to have is changes in taxpayer behavior. People tend to move away from the newly taxed goods and services.”
In response to a question from Sen. Grant Burgoyne, D-Boise, Santos said this assumes the sales tax remains at 6 percent. If the rate were lowered because the base is bigger without the breaks, he said, “That would have an impact too.”
Sen. Jim Guthrie, R-McCammon, noted that the state general fund collects $1.2 billion a year from sales taxes. Comparing that to the $1.97 billion in sales tax breaks, he said, “So we’re giving up more than we’re getting?” Santos said that’s true with some caveats. “What I’m talking about is stuff that we are not taxing right now, so this is in addition, another $2 billion roughly out there,” he said. But the $1.2 billion the general fund receives from sales taxes doesn’t count revenue sharing with local governments; for every dollar collected in state sales taxes, cities and counties get 11.5 cents, Santos said. So that’s another adjustment to the total to keep in mind.