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Taxing Some

Idahoans rich in tax exemptions


On Friday, the Joint Finance-Appropriations Committee announced an ongoing 7.1 percent across the board budget cut for state agencies. JFAC's plan calls for movement of more than $140 million in federal stimulus dollars, dedicated moneys and reserve funds to lessen the impact on some. Part of the caulking requires an injection of roughly $80 million into public schools, leaving very little in the Public Education Stabilization Fund. What's left in reserves? Not quite $100 million.

Cathy Holland-Smith, the legislative budget director, ran the numbers: "We took $24 million out of reserves to get out of '09. We took $50 million out at the beginning of this year. The governor suggested $20 million, but we took another $33.5 million and $49 million out of PESF ... there's still another $60 million we've got to come up with [in 2011]."

So far, all numbers cited in this column--for budget cuts and for reserves--have been in the millions. Let's look at a number in the billions.

Idaho has $1.7 billion in sales tax exemptions on the books. That's in contrast to just $1.2 billion per year that the state actually collects in sales taxes.

Sen. Chuck Winder and Reps. Wendy Jaquet and Grant Burgoyne, have resolutions designed to establish conditions for tax exemptions. Winder's bill recently gained traction in the Local Government and Taxation Committee on the Senate side.

"Let's bring 'em out in the light of day and see what they are," said Winder to the committee, which agreed unanimously to hear the bill.

The plan calls on the Legislature to review current tax exemptions every five years and adds a mandatory five-year expiration on exemptions enacted after July 1, 2010. If the Legislature chooses to enact any more tax exemptions, that is. A bill that sought to provide sales tax exemptions for all homeless shelters, the brainchild of Rep. Branden Durst of Boise, recently died in the Senate committee, sending a clear message: no exemptions this session.

"It passed unanimously in the House ... but the committee chose my bill to be the sacrifice," Durst said. There's no way to get it through without that Senate committee, Local Government and Taxation.

Durst's bill to help homeless shelters won't rise to the ranks of other state tax exemptions--some of which were imp lemented decades ago--like exemptions for purchases on interstate trucks, funeral caskets or the numerous agriculture exemptions.

Rep. Dennis Lake of Blackfoot is the chair of the House Revenue and Taxation Committee. He holds an influential position as the gatekeeper for Idaho tax-related bills, which can only originate in the House. Each bill in regard to revenue--tax hikes, cuts and exemptions--must go through this man.

In spite of the hot debate over the exemption processes, Lake feels that the current tax-exemption system works fine the way it is.

"I say if you want a new tax exemption, bring me a bill. I say the same thing if you want to repeal one, bring me a bill," said Lake.

"When did we last review tax exemptions? 2008! When was the last time before that? 2003! If there's a need to repeal an exemption, we look at it," said Lake. "In those interim committees we brought nine--we prepared 14--brought nine bills to repeal individual tax exemptions, and two were actually repealed by the Legislature."

Another option for staving off budget cuts unda' the rotunda involves actually raising taxes, something most lawmakers and Gov. C. L. "Butch" Otter continue to rule out as an option this year. They may not have that luxury in 2011. With JFAC already setting budgets for agencies for next year, now is the time to bring forth any bill that raises taxes.

"If they've got one, we'd like to see it," said Rep. Mike Moyle of Star, the majority leader. "If you wanna raise taxes before we set budgets, they better do it soon."

Sen. Nicole LeFavour, a Boise Democrat, has a bill that would create a new tax bracket for higher earners.

"It would be for one year only, for the 2010 tax year. It would change the flat rate of 7.8 percent to a progressive tax for those earning from $50,000-$500,000 per year," said LeFavour.

Rep. Shirley Ringo of Moscow, also a Democrat, also has a revenue creation bill, which would net the state an additional $40 million per year.

"It's just an extra 5 percent on people with taxable incomes over $50,000 per year. So a hypothetical family of four earning $75,000 a year, with their taxable income at $50,000, would pay just an extra $164," she said.

Lake remains mute on when these bills will get a hearing.

"I have several RSs [proposed bills]. I'm hoping we won't need them this session," he said.

As JFAC goes about setting budgets drastically lower, another day looms on the horizon for the Idaho Legislature: Election Day.

"Rep. Lake hasn't scheduled my bill yet," Ringo said. "But if the public reaction is a call for more revenue, rather than more cuts, we may see that happen."