Idaho tax agency releases study on business tax
Published: December 19,2012
A new state report on how Idaho’s hundreds of cities, counties and local taxing districts rely on fees levied against business equipment has been published in time for the 2013 Legislature, where lawmakers in Boise will be urged by a pro-business group to dump what it calls “Idaho’s most-hated tax.”
A partial repeal of the personal property tax in 2008 – on everything from office desks to big construction equipment – has never gone into effect, but the Idaho Association of Commerce and Industry said timing is right now, with the economy again expanding, to eliminate the tax over the next six years.
According to the Idaho State Tax Commission’s 51-page study released Dec. 19, the tax will generate some $141 million for local governments in 2012, to help fund courts, plow snowy roads, trim weeds at cemeteries and ensure ambulances and fire trucks are ready in emergencies.
But the tax is uneven, the study shows. For instance, Ada County, Idaho’s most-populous, relies on it for about $6 million annually, just 7.5 percent of its total budget.
In eastern Idaho’s Caribou County, however, where agriculture giants Monsanto and Agrium Conda have lots of taxable machinery, it accounts for 43 percent. Schools in Soda Springs, Caribou County’s seat, get half their funding from taxes on business equipment.
Not surprisingly, Caribou County officials such as Commissioner Phil Christensen have been meeting with local legislators ahead of the 2013 session, to discuss the potential consequences.
“No matter how you look at it, taxes aren’t a good thing, but they’re a necessary thing. Everybody likes good roads and services,” Christensen said, adding even a phased repeal would be painful. “It’s like cutting the dogs’ tails off an inch at a time.”
According to the new state study, Caribou County is Idaho’s most-dependent on the personal property tax, but others are in the running. Power County, home of J.R. Simplot’s big fertilizer plant west of Pocatello, relies on it for 38 percent of its revenue.
In central Idaho’s Lincoln County, the tax comes to a third of revenue; Clark County gets more than a quarter of its money from the personal property tax.
“There’s been so much talk about exempting personal property,” said Alan Dornfest, property tax policy supervisor for the Tax Commission. “It’s important that the policymakers have the information to make an informed decision on this issue.”
Alex LaBeau, the IACI director, is intensifying his group’s repeal push in advance of the session.
This is the year, he said, to eliminate a tax that’s not only onerous to administer but monopolizes resources better spent on expanding a business’s operations – and growing Idaho’s economy. Stretching it over six years would soften the hit to local governments, he said.
Meantime, an accompanying economic acceleration would help preserve necessary services that commissioners such as Christensen in Caribou County fear losing, LaBeau said.
“The impact on the economy, based on the study we’ve done, is that for every dollar reduced in personal property tax, it increases the personal income of Idahoans by $6,” he said. “Those dollars don’t stay stagnant; they’re invested back to the company, into equipment and people.”
The state’s former chief economist, Mike Ferguson, is skeptical. Ferguson now runs the Idaho Center for Fiscal Policy, funded by a Minnesota-based poverty reduction group.
Many counties, taxing districts and schools are up against budget constraints now, he argues, so eliminating a significant pillar of their support will either force them to ask other classes of property taxpayers to make up the difference or to reduce essential services.
“There’s not a lot of slack in these budgets,” Ferguson said.
Counties also have so far reacted coldly to LaBeau’s group’s proposal; the release of the new state data does nothing to assuage their concerns, said Dan Chadwick, Idaho Association of Counties director.
“Unless there’s a replacement mechanism, whether it’s in some kind of appropriation or a capture of state funds to replace those dollars … there will be no support for this type of proposal from the counties,” Chadwick said.
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