Panel likely faces fight on tax breaks

TWIN FALLS, Idaho – Idaho’s $1.6 billion in annual tax exemptions will soon be fodder for an interim lawmaker committee after the Senate earlier this year blocked most efforts to tinker with the state tax system until the exemptions get broader scrutiny.

The 10-Republican, four-Democrat interim committee on tax exemptions meets Aug. 1-3, then again Oct. 8-10. Part of the discussion will be efforts by business to eliminate the tax on business equipment, which failed in the 2007 Legislature.

Lawmakers, including Sens. Brent Hill, R-Rexburg, and Joe Stegner, R-Lewiston, have said that tax breaks have been created in the years following the start of the state sales tax in 1960 with little regard for whether they actually made sense for the overall economy and fairness of its tax system.

“The Senate has been frustrated by the piecemeal approach to tax exemptions for some time,” Stegner told the Associated Press.

Still, not all lawmakers are convinced Idaho’s tax exemptions should be altered.

Tax legislation in Idaho starts in the state House. Some of that chamber’s members see the interim committee as an attempt by the Senate to assert more control over taxation issues.

“I’m pretty much OK with the status quo. We’re having this interim committee basically because the Senate forced it,” Assistant Majority Leader Scott Bedke, R-Oakley, told the Twin Falls Times-News.

Last year, the House passed a bill 47-20 that would have slashed as much as $100 million on commercial personal property, a move demanded by the Idaho Association of Commerce and Industry and businesses, including the J.R. Simplot agricultural conglomerate, that say it’s hard to calculate and stunts economic growth.

The Senate, however, opted to shelve the measure, in part because some lawmakers said it would further narrow the tax base – without providing a way to pay for losses in state revenue.

“If they are serious and hate this personal property tax so much, are they willing to help pay for the personal property tax (elimination) by giving up some other exemption or deduction?” Hill asked.

Idaho’s tax exemptions are numerous: Businesses now don’t pay sales and use tax on equipment and materials used in manufacturing, processing, mining, farming, fabricating operations, or clean rooms for semiconductor making. Canal companies don’t pay sales taxes either, a nod to the state’s powerful agriculture lobby.

Nonprofit hospitals, groups such as the American Cancer Society and Easter Seals, and volunteer fire departments also don’t pay sales taxes on their purchases.

In the 2007 Legislature, Hill’s Local Government & Taxation Committee called a halt to efforts to expand exemption recipients.

Lobbying groups, including the Associated Taxpayers of Idaho, whose members include Idaho businesses, say the impending debate over tax exemptions will be difficult, in part because few businesses or groups that now receive exemptions are eager to give them up.