SUN VALLEY – Gov. Butch Otter told Idaho’s largest business lobby Monday he backs their top priority -- repealing the $129 million personal property tax that provides about 11 percent of total property tax revenue statewide. A key lawmaker said that chances for killing the tax are better than ever in 2013.
Otter acknowledged differing with Idaho Association of Commerce and Industry President Alex LaBeau during the 2012 Legislature, when Otter instead approved an income-tax rate cut, calling their discussions “warm, not heated.”
Cutting income taxes had to come first, Otter argued, because it covered a broader segment. “In order to help the economy, we needed to help the entire economy.”
The next step, Otter said, is phasing out the personal property tax. “I want you to know my commitment to the personal property tax and the reduction and eventual elimination of that is undaunted,” Otter said to applause at the group’s annual public policy conference.
House Majority Leader Mike Moyle said the time has come for repeal, adding that a draft bill is already circulating for the 2013 Legislature.
“We’re on the verge of getting something done here that will be beneficial to everybody,” said Moyle, R-Star. “It’s something we need to get done and be done with it. The stars are aligned now.”
IACI has pressed for years to repeal the tax on equipment and other non-real property, which is considered an administrative nightmare by many businesses.
Senate Majority Leader Bart Davis, however, said the state budget is unlikely to be robust enough to replace $129 million in lost income to local governments. While the average proportion is 11 percent, four of Idaho’s 44 counties receive more than 25 percent of their property tax revenue from personal property tax. The tax supports all levels of local government reliant on property taxes, most of which is collected on assessments of land and structures.
“I couldn’t agree more that that’s a priority,” said Davis, R-Idaho Falls. “But if the solution today is that the state of Idaho will provide an economic reimbursement to the counties. ... I don’t know how we have the dollars to do that.”
Davis suggested giving local governments other concessions, saying one idea could be lifting the 3 percent cap on property tax growth. “If we are all pointed to that goal, and I am, too, the devil’s in the details and we do have to make it work,” Davis said.
Two other House leaders who join Moyle on the House Revenue & Taxation Committee agreed repeal a priority, Assistant Majority Scott Bedke, R-Oakley, and GOP Caucus Chairman Ken Roberts of Donnelly.
Bedke said the question of whether to make local governments whole will drive the debate.
IACI’s LaBeau was pleased with the remarks. “I think you have a clear indication that in terms of tax policy that’s the No. 1 issue to deal with in the next legislative session.”
As for refilling local government coffers, LaBeau said, “I don’t know if you have to replenish the dollars. You can feather that out over five years and nobody would notice.”
During the 2012 session, LaBeau argued eliminating the tax would be the best thing lawmakers could do to spur economic growth.
Instead, the Legislature and Otter cut the top rates for corporate and personal income tax by 0.2 percent at an estimated cost of $35.7 million, with the personal relief going to the top 17 percent of tax filers.
The 2008 Legislature enacted a personal property tax repeal bill covering assessments up to $100,000. But repeal was contingent on 5 percent budget growth, a figure that’s not been met since. Earlier, the tax was repealed on agricultural equipment and Moyle said the Legislature had an obligation to remove the tax on all businesses.
IACI includes many of the state’s largest companies, including Amalgamated Sugar, Basic American Foods, Battelle Energy Alliance, Blue Cross and Regence Blue Shield, CenturyLink, Chevron, ExxonMobil and ConocoPhillipps, Clear Springs Foods, Clearwater Paper, Hecla, Hewlett-Packard, Idaho Power and Intermountain Gas, Key Bank and US Bank, Melaleuca, Micron, Monsanto, Saint Alphonsus and St. Luke’s health systems, Simplot and Walmart.
The annual meeting marks the transfer of leadership to Micron’s Mike Reynoldson, who succeeds Mark Benson of Potlatch as IACI chairman. Mark Dunn, of Simplot, was named chair-elect and will succeed Reynoldson in two years.