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Rep. Lake: Bring a bill to end tax exemptions

Quit talking about repealing tax exemptions. Bring a bill to do it.

That’s the message Rep. Dennis Lake, the House Revenue and Taxation Committee chairman, sent the Senate by shelving without a hearing its measure calling for an annual review of existing sales tax exemptions.

Some Senate Republicans and the Legislature’s Democrats complain existing exemptions benefit narrow slices of the economy but aren’t suited to growing the state’s future economy. Those cries, especially among Democrats, have grown louder this year, as Idaho’s tax revenue shrinks with the dismal economy.

Lake, R-Blackfoot, said Idaho has reviewed exemptions before – in 2007, 2003, 2002 and 1994 – without managing to dump any.

In fact, it’s gone the other way. The House approved an exemption on homeless shelters’ purchases earlier this year, but it died in the Senate.

“We don’t need another review. Bring me a bill that’s got 18 co-sponsors — let’s not just talk about it,” Lake said Thursday. “If they send a bill that had that many co-sponsors, and they really want to kill all of the exemptions, I think I could get that to the floor of the House for a discussion.”

Combined with the absence of a sales tax on services, dozens of exemptions from Idaho’s 6 percent sales tax on tangible personal property — some of them dating back more than 40 years, all passed by the Legislature — have resulted in the state not collecting up to $1.7 billion in revenue annually.

Exemptions now apply to production equipment, devices required for air or water pollution, school lunches, coffins, railroad cars, broadcast equipment, commercial aircraft, and ski lifts and snow grooming equipment.

The list goes on: motor fuels, wood, coal, and natural gas, used mobile homes, precious metal bullion and coins, phone equipment, hospital purchases, even vending machines.

“People need to understand what they are,” said Sen. Chuck Winder, sponsor of the latest Senate review bill that’s now stuck in the House. “Just because they are on there from 30 years ago doesn’t mean they need to be passed on.”

But dumping even the most innocuous among them has proven futile. Some have another name for such repeal efforts: “The Lobbyist Full-Employment Act,” because industries that have grown to rely on exemptions to slash their costs muster a posse of hired guns every time to shoot them down.

Five exemptions proposed for repeal by the summer 2007 interim committee were defeated in Lake’s committee the following session. There, tax-leery lawmakers like House Majority Leader Mike Moyle, R-Star, rejected measures to eliminate sales tax exemptions that benefit funeral homes, ski resorts, publishers of free newspapers, vending machine owners and car dealers.

Another consideration: The tax exemptions that seem the ripest for elimination only amount to a few hundred thousand dollars annually — not enough to plug the gaping, $200 million budget hole Idaho faced this fiscal year.

“Putting a sales tax on caskets is not going to save this budget,” Moyle said.

Sen. Brent Hill, R-Rexburg and the Local Government and Taxation Committee chairman, agrees some exemptions are too valuable to eliminate.

Take the exemption on purchases of supplies and equipment used to produce goods like microchips, french fries or travel trailers, all Idaho products. That saves manufacturers like Micron Technology Inc. or J.R. Simplot Co. an estimated $147 million annually, according to the Division of Financial Management, while spurring investment in equipment that helps provide jobs for Idaho residents as those industries grow.

Still, House Minority Leader John Rusche, D-Lewiston, was disappointed the Senate measure won’t get a House hearing.

“We need to be looking at the exemptions with an eye toward their value to the economy of the future,” Rusche said, while conceding tax policy is tough to change. “It’s true: One person’s loophole is another’s economic development.”

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2 comments

  1. I do believe we need to “Repeal” the Personal Property Tax!! It is in direct competition to the Ideal that the accumulation of wealth is a good thing. I personally halted capital expenditures years ago when I started paying this “DOUBLE TAX”. If I had been a Farmer, my backhoe and other equipment would be tax exempt. I was competing with them for excavation and their fuel and equipment was exempt(illegaly I think)! But nevertheless it was so.

  2. We don’t have a revenue gap we have an employment gap. Without agressive, and strategic exemptions we run the risk of loosing jobs, thus making unemployment worse.

    It’s not just the individual State Income tax revenue collected that is a problem, but it is also the expenses that unemployment creates for a State, unemployment bennifits, madicaid, s-chip, welfare, food stamps, crime the list goes on and on.

    What was this paragraph based on?
    “Combined with the absence of a sales tax on services, dozens of exemptions from Idaho’s 6 percent sales tax on tangible personal property — some of them dating back more than 40 years, all passed by the Legislature — have resulted in the state not collecting up to $1.7 billion in revenue annually.”

    You assume no negative impact on behavior based on the collection of this 1.7 billion (not very realistic).

    The question is where is that 1.7 billion (if that is a real number) better spent, creating or sustaining jobs in the private sector or controled by the State?

    We should be doing the exact opposite. We should be creating more exmptions that are most likely to create job growth.