Otter vetoes grocery credit

BOISE – Gov. Butch Otter set up a possible override battle with legislators Tuesday by vetoing the grocery tax bill that lawmakers in both houses had passed with overwhelming majorities.

“It’s the wrong thing to do,” Otter told The Spokesman-Review. “It spends $11 million more than we wanted to.” He said “the most obvious and glaring” objection he had was that “it doesn’t really get that tax relief to the people that really need it.”

The legislation would have raised the annual grocery tax credit for all Idahoans from the current $20 a year to $40, and from the current $35 for seniors to $60, with an annual price of about $32 million.

Otter has been holding out for his own targeted plan instead, which would give a big break of up to $90 a year to the lowest-income Idahoans but would phase out as incomes rise. Middle- and higher-income Idahoans would lose their current credit; the total cost to the state would be $22 million.

He acknowledged that based on their earlier votes, lawmakers could easily override his veto. “That’s their prerogative,” the governor said.

House Speaker Lawerence Denney said, “I think we have to take action.” He noted, “Certainly it passed by large majorities up here.”

Senate President Pro Tem Bob Geddes said, “We might look at the option of lowering the impact a little. We could let it sit there. Or perhaps the caucus will want us to look at override.” Geddes said among those three options, he favors just leaving the issue on the table for this year’s session.

“There’s going to be no one who receives a tax benefit this year as a result of what we do right now,” Geddes said. “Most people at this point in time have either filed their taxes or soon will file their taxes.”

Both parties, in both houses, held caucuses on the issue Tuesday afternoon but reached no definitive decisions about a possible override.

“It’s a House bill, so we have the luxury of sitting back for a little while and seeing what the House does,” Geddes said.

Denney said if the bill were to die for this year, “It’s not the end of the world, and certainly that leaves another $30 million on the table. With the recent numbers, what the governor said in his message might be correct – we may need that money.”

In his veto message, Otter wrote, “I appreciate the debate that took place in the House and Senate on this issue, as well as the good intentions of the sponsors – to whom I expressed those concerns early and often. However, the Legislature’s deliberations failed to adequately consider the degree to which a decision on the grocery tax credit would impact other necessary programs and services.”

He added, “It remains my firm belief that the best way to begin addressing both the inequity of the sales tax on food and the legitimate obligations of state government is to target tax relief where it is needed most.”

Lawmakers can override a veto with a two-thirds vote – and the final version of House Bill 81a received well over two-thirds approval in both houses. In the Senate, it passed unanimously, and in the House the vote was 63-6.

Idaho is one of a minority of states that fully applies its sales tax to groceries. In August, lawmakers raised the state’s sales tax from 5 percent to 6 percent.

Rep. Frank Henderson, R-Post Falls, said he’d vote to override the veto. “I promised our constituents up there that we would enable some relief under grocery tax, so I would absolutely do that,” Henderson said.

Sen. Mike Jorgenson, R-Hayden Lake, said, “I think should this veto survive, it might give more impetus to considering real grocery tax reform down the road,” such as completely removing the sales tax from groceries. “It’s an awkward position to be in, because you want to get anything you can for the citizens of Idaho,” he said. “Clearly this was a compromise, and it’s better to get something than nothing. That’s why I voted for it in the first place.”

Sen. Jim Hammond, R-Post Falls, said he was “disappointed” by the veto. “I understand it isn’t what he wanted, but if you look at all the different iterations that started in the House and what came through … . I would assume some kind of a compromise is better than nothing at all. I still hope that we can revive something and provide some kind of relief on that sales tax issue.”

While the Republican caucuses in both houses met behind closed doors, Democratic caucuses met openly and wrestled with the issue. Sen. David Langhorst, D-Boise, mused that Senate Democrats could throw their numbers behind an effort to stop a veto override but would need Republican support both to stop it and to enact a further-reaching, targeted plan. “I don’t see any benefit … if it’s just us,” he said.

Geddes said at the Senate Republican caucus, “a fair number of people” questioned the ramifications of overriding a governor’s veto just as the end of the legislative session looms – when the fate of most of the session’s legislation rests in the governor’s hands.

“I can remember the long session – I can remember when Gov. (Dirk) Kempthorne vetoed bills,” Geddes said. “We’ve still got a lot of our hard effort sitting down on his desk to be vetoed or approved.”