Proposal to cut income tax well received – mostly

Brad Carlson//January 10, 2011

Proposal to cut income tax well received – mostly

Brad Carlson//January 10, 2011

Idaho state capitol

Uniform World owner Rex Burmester says a proposal to reduce Idaho income tax rates would help his small shop in Nampa but would not have a huge impact.

“I’m not looking to pay any more taxes than the next guy, but that’s down on my priority list,” he said. “Where we feel it is health care and health insurance.”

Idaho Gov. C.L. “Butch” Otter, in his annual State of the State and Budget Address to open the new legislative session, said he supports a proposal to reduce income tax rates for individuals and businesses over 10 years starting in 2013. Otter and business groups say this would make Idaho more competitive and stimulate economic growth. But the real impact would vary in each business.

Uniform World, which has supplied apparel and accessories to health care employees, felt the recession but is in an industry that sees fairly steady demand, Burmester said. The family owners have resisted the urge to expand the business much over its nearly 33-year existence, which now employs three.

Idaho probably can’t cut taxes enough to provide Uniform World enough capital to add much inventory, buy new equipment or expanding its building, he said.

“But I would not object if they did that,” Burmester said. “It would allow me more breathing room to absorb other increases.”

Meridian contract manufacturer Computrol Inc. is a large employer in the volatile industry of circuit boards and electronic assemblies. Proposed tax cuts would provide more money to spend on the business, company President Charlie Scott said.

Computrol, in business since 1984, now employs about 150 people including some temporary hires to accommodate stronger demand. If Idaho cuts income tax rates, some of the money saved would go toward staff, but most would be spent on equipment, he said.

“Paying less in taxes allows us to spend it somewhere else,” Scott said. The investments would be gradual if Idaho income taxes are reduced gradually as proposed, he said.

Rep. Marv Hagedorn, R-Meridian, proposes to reduce both to 4.9 percent ultimately, from 7.6 percent corporate and 7.8 percent (highest rate) individual rates.

“That will go a long way toward providing a competitive advantage for Idahoans, stimulating economic growth and expanding our tax base,” Otter said in his address. “Of course, there are budget implications. They must be weighed carefully. But there also are implications for our ability to provide economic opportunities.”

Boise Metro Chamber of Commerce President and CEO Bill Connors said a lower corporate income tax would amount to an economic-development tool because Idaho is not competitive with surrounding states.

Idaho’s 7.6 percent corporate income tax rate compares to 6.6 percent in Oregon, 5 percent in Utah and 6.75 percent in Montana, The Tax Foundation reports. There is no income tax in Washington, Nevada and Wyoming.

“We know it’s a tough budget time, and the State of the State reflected that,” he said. “But at the end of the day, if you attract more business and expand existing business, you’re going to create more revenue. Sometimes you’ve got to pay a dime to get the dollar.”

Cutting the Idaho corporate tax rate would make Idaho more attractive to businesses deciding where to locate a facility and would be well received by existing businesses that often are recruited by other states, Connors said.

Associated Taxpayers of Idaho President Randy Nelson said cutting tax rates can make states more competitive globally as they try to spark business attraction, growth and hiring.

“That’s part of the risk you’re taking,” he said. “It’s got fiscal impact to it, but long term, you can cushion that if it’s successful if you do attract someone or have an Idaho employer decide to expand,” he said.

From July through November, Idaho brought in $39.6 million in corporate income tax, 13.5 percent above projections, the state Division of Financial Management reported. Individual income tax collections totaled $447.5 million, 5.1 percent above projections.