Senate mulls personal property tax 

A bill that would eliminate the personal property tax that Idaho businesses pay to counties for machinery, equipment and tools remained under debate in the state Senate late last week.

The Senate on March 27 ordered that House Bill 599 be amended.
Senate Majority Leader Bart Davis, R-Idaho Falls, said senators had expressed concerns about the bill’s financial trigger mechanism – which would be based on state revenue growth – and about a provision requiring the state reimburse counties all of the revenue by the end of a five-year phase-in period. Some senators want to exempt only businesses with $50,000 or less in taxable personal property, he said.
Legislators in favor of an exemption threshold said it would exempt over 80 percent of businesses while enabling counties to continue to derive revenue from large businesses and business expansions. Business groups have said this approach hurts small but equipment-intensive businesses.
The Senate had not voted on an amended House Bill 599 as of early afternoon March 27. An amended bill would require House approval.
Earlier, the Senate Local Government and Taxation Committee voted 5-4 to send the bill to the full Senate with a do-pass recommendation. A motion to hold it in committee died.
 House Bill 599 would phase out the personal property tax over five years starting in fiscal 2010, at at total estimated cost from $110 million to $120 million. Personal property acquired after Jan. 1 of this year would be tax-exempt. The state would reimburse counties The House amended the original bill, boosting the state revenue-growth trigger from 4 percent to 5 percent and allowing school districts to add personal property back onto their valuations so as not to reduce bonding capacity. The House passed it 39-31.
Arguments against the bill in the Senate committee hearing included that it would shift the local tax burden to homeowners while reducing revenue to counties and reducing school districts’ bonding capacity – in part because the amount reimbursed would be fixed. Many representatives of school districts and municipalities voiced opposition.
Other arguments in opposition included that personal property tax is a sizable source of revenue in some counties, state revenues currently are stressed and coming in below forecasts, and that a business construction project would be property-tax-exempt by the time it appears on the tax rolls even though the project is under way. Several members of the Senate committee said the bill lacks a sufficient revenue- replacement mechanism, and that phasing out the tax over five years exposes the state to too many unknowns.
Power County Commissioner Vicki Meadows told the Senate committee that the personal property tax makes new and expanding industries partner with communities in paying for infrastructure. And while Power County could lose 40 percent or more of its valuation if the bill passes – largely because it has many equipment-heavy businesses but only moderate growth in population – 31 of the state’s 44 counties risk exceeding their tax-levy caps before the five-year phase-in period ends, she said.
“Levy-limit questions will have to be answered at some point in time,” said Nez Perce County Commissioner J.R. Van Tassel.
Phasing out the personal property tax is proposed by the Idaho Association of Commerce & Industry on behalf of many business groups. “This is a bad tax for all employers, both large and small,” association President Alex LaBeau said.
Supporters told the Senate panel that it’s an unfair tax that is hard to administer and collect. Money saved in personal property tax would be spent on businesses and their employees – to the benefit of Idaho income and sales tax collections, they said.
LaBeau said the personal-property share of Idaho total market value has been declining since 1999. And since personal property goes on the tax rolls at full value and subsequently depreciates, liability shifts to other types of property unless new personal property is continuously added.
“This legislation stems that tide once and for all,” he said.
Associated Taxpayers of Idaho President Randy Nelson said Idaho total taxable value grew from $78.1 billion in 2004 to $124.8 billion in 2007. Personal property’s share of total value grew from $8.4 billion to $11.7 billion during that period, he said.
Idaho many years ago eliminated the personal property tax for individuals, and about eight years ago eliminated it for agricultural equipment.
Sens. Tim Corder, R-Mountain Home, and Joe Stegner, R-Lewiston, argued against the bill during the committee hearing.
Corder said there is no funding mechanism to cover the state’s liability – such as removing enough existing income and sales tax exemptions – and that eliminating the tax on personal property could effectively “undo” tax relief provided by the 2006 increase in the homeowners exemption.
Stegner raised concerns about fairness to all taxpayers, the lack of provisions to deal with changing inflation and county budget needs, and delaying state fiscal impact for a year. He said he is a longtime advocate of removing the personal property tax, but “I am not willing to do it at any cost. I frankly find this bill crafted by the people who benefit from it.”
Committee Chairman Brent Hill, R-Rexburg, said business is the only sector now paying a personal property tax that is unfair and that can be manipulated by unscrupulous businesses.
Sen. Jeff Siddoway, R-Terreton, said he supports getting the tax-elimination plan on the books now even though revenue growth may not reach the 5 percent trigger level the first year. The Legislature can modify the bill in future sessions as concerns are studied and addressed, he said.

NEW! Online only subscription. 24/7 access to premium online subscriber content for only $79.00 a year!
CLICK HERE TO SIGN UP TODAY!

Comments are closed.