Idaho Examiner: James Ruchti Legislative Update Week 7"Common Sense News"

http://click.linksynergy.com/fs-bin/click?id=TUUGX/1ZDF0&offerid=115126.10000595&type=4&subid=0

http://click.linksynergy.com/fs-bin/click?id=TUUGX/1ZDF0&offerid=20738.10000022&type=4&subid=0

http://click.linksynergy.com/fs-bin/click?id=TUUGX/1ZDF0&offerid=123504.10000026&subid=0&type=4

http://click.linksynergy.com/fs-bin/click?id=TUUGX/1ZDF0&offerid=129915.10000003&subid=0&type=4

http://click.linksynergy.com/fs-bin/click?id=TUUGX/1ZDF0&offerid=129320.10000033&type=4&subid=0

http://click.linksynergy.com/fs-bin/click?id=TUUGX/1ZDF0&offerid=50252.10000217&type=4&subid=0

Reports

James Ruchti Legislative Update Week 7

Posted on: February 24, 2007

We just finished the seventh week of the 2007 Legislative Session. This week I want to tell you about an important piece of legislation being considered by the House in my Revenue and Taxation Committee. It is House Bill 206, which proposes total repeal of the personal property tax for all Idaho businesses. I have been more conflicted on how to vote on House Bill 206 than I have been on any other piece of legislation this Session. After collecting input from the stakeholders and studying the matter carefully, I have decided on a position. I will explain it below.

Before I do, I want to tell you about two meetings taking place on Saturday. The purpose of the meetings is to explain the status of the Highway 30 (from McCammon to Lava Hot Springs) construction project to anybody who is interested. The meeting in McCammon will take place at the city offices at 9:30 a.m. The meeting in Lava will take place at 11:00 a.m. at the elementary school. Both meetings will cover the same material and will last about an hour each. Ed Bala, a District Engineer for the Idaho Transportation Department, will make the presentation. Senator Diane Bilyeu, Representative Ken Andrus, and I will all be present to hear your thoughts on the Highway 30 project or on any other issues important to your families. We hope you can attend. Now, on to House Bill 206.

What is the personal property tax? The personal property tax is a tax paid by businesses and assessed by county assessors on the value of business equipment, furnishings and other property just like real estate taxes are assessed on homes and residential parcels of land. The tax will generate $108 million this year. The money will go to cities, counties and the more than 1,000 taxing districts in Idaho.

What does House Bill 206 do? House Bill 206 eliminates the personal property tax by fiscal year 2016. The Bill provides for an immediate exemption of personal property in the amount of $50,000 in taxable value, which would shift $4 million to $7 million to homeowners, farmers and other property taxpayers. Some of this may be offset by a decrease in administration for collecting the tax. This immediate exemption would free 84 percent of all Idaho businesses from the tax – our small businesses.

Idaho’s largest businesses comprise the remaining 16 percent, which pay most of the personal property taxes – approximately $100 million this year. For those businesses, the tax on property over $50,000 in taxable value would be eliminated slowly over the next decade. Each year, approximately $12 million from the general fund would be sent to the local taxing districts to make up for the loss. Thus, by 2016, $96 million in local government costs will be shifted to those who pay state income and sales taxes.

Why is the Bill needed? Chances are that if you were to ask a business owner how they feel about the personal property tax, they would give you an ear full of complaints. The tax forms are complex and require business owners to track and pay taxes on everything from copy machines to staplers to heavy machinery for years after the items were purchased. In addition, small and large businesses argue they would rather take the money and reinvest it into the business – creating jobs, paying for health care and providing job training.

Where is the conflict? Bannock County’s largest employers include ISU, School District 25, Marsh Valley School District, Portneuf Medical Center, AMI Semiconductor, Convergys and Union Pacific (not to mention the employees we have from J.R. Simplot Company). While small businesses and large corporations push for the property tax repeal; counties, municipalities, public schools, universities and individuals fear the impact of such a large change in tax policy.

Many feel business interests have already been addressed. Business tax cuts in the last decade total more than $130 million. The legislature provided more than $40 million in tax cuts between 2001 and 2006. In addition, the 2006 sales tax increase provided business with a $90 million property tax cut. House Bill 206 would further narrow the tax base. This has historically required the State to either raise the sales tax or cut services. These choices, of course, burden the individual taxpayer.

The loss of property tax also makes our revenue sources more volatile. In an economic downturn, sales and income taxes are less stable, while personal and real property values tend to be more constant.

Our largest employers also have an interest in maintaining a healthy tax policy in the State. They want State revenues to go towards job skills training programs, community college services, funding high school increased math and science requirements, and other programs.

In addition, House Bill 206 as presented to the Committee earlier this week does not reimburse local governments for lost revenues to urban renewal districts. Finally, given the major changes the Legislature has implemented in our tax policy in the last year, many would like to see how those changes shake out and how the economy continues to perform before making any further significant changes to that policy.

What is the solution? In an attempt to address the concerns of each of these competing interests, I have decided to vote for an amendment to House Bill 206 being proposed by Representative Bill Killen. The amendment would provide an immediate exemption of personal property in the amount of $50,000 in taxable value. As noted above, this would provide personal property tax relief to 84 percent of Idaho’s businesses and only cost $4 million to $7 million. Thus, the vast majority of businesses in Idaho receive tax relief from this very unpopular tax at only a fraction of the cost originally contemplated by House Bill 206.

This is a good solution to a very difficult problem. It does not give each of the stakeholders what they want, but it does provide a workable solution.

Please feel free to contact me. I can be reached at (208) 332-1131 or via e-mail at jruchti@house.idaho.gov.