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$2,000 tax credit for new hires advances in House

Idaho State Capitol Building

Idaho State Capitol Building

The House Revenue and Taxation Committee voted unanimously to advance a measure that would offer Idaho companies a $2,000 tax credit for new hires who make more than $35,000 per year and receive health insurance.

The committee agreed Feb. 26 to pass the bipartisan measure sponsored by House Minority Leader John Rusche, D-Lewiston, and House Majority Leader Mike Moyle, R-Star. It is designed to spur job creation at a time when tens of thousands of Idahoans are looking for work.

The credit can only be claimed once the employee has been working for a company full-time for nine months. It can be carried forward for five years, and it would apply retroactively to Jan. 1, 2010.

It would also apply only if the company is employing more people than the preceding year or during the average of the three previous years, whichever is higher.

The State Tax Commission estimates that the $2,000 credit would be offset by the income and sales tax revenues created by new jobs, estimated to be approximately $2,100 for each new position. The commission says the state general fund would benefit in future years from the increased employment.

Idaho currently has two similar jobs-related tax credits, one that offers businesses a $1,000 tax credit for new employees who earn $15.50 per hour and another that provides a $500 credit for new hires at “revenue-producing enterprises” that fabricate, manufacture or process natural resource products.

Current Idaho law limits those three tax credits to 3.25 percent of a company’s net income and restricts all state tax credits to 50 percent of a business’ total tax liability.

The new law would restrict only these three credits to 50 percent of the total tax liability without regard to other tax credits.

Lawmakers on the committee had a few questions but passed the measure with no debate.

Some wondered how often the existing credits were used.

Dan John, tax policy manager for the State Tax Commission, said they are not claimed as often as other state business incentives because they can be fairly complex to calculate and because of the 50 percent income limitation, a threshold that he said is easily reached in combination with other credits. The new provision may make the jobs-related credits more attractive, he said.

Rep. Dennis Lake, R-Blackfoot and chairman of the committee, wondered if the 3.25 percent income limitation had made it difficult for companies to take advantage of the credits.

Rusche said the provision allowing businesses to carry forward the credits for five years, an increase from the current three-year limitation, would make them more attractive.

During the same meeting, the committee also voted to give a full hearing to a new version of a bill that would impose restrictions on cities’ powers to initiate local improvement districts to pay for infrastructure projects. The measure, which is targeted at a proposed streetcar project in Boise, would require city councils to hold elections or petition property owners for any projects that require more than $500,000 in bonds. The previous bill imposed those restrictions on projects worth more than $250,000 and did not seem to allow for the use of petitions for city-initiated improvements.

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