A personal property tax bill finally surfaces

The personal property tax debate has finally gone public.

The House Revenue and Taxation Committee voted to introduce House Bill 272, which would — partially — repeal the unpopular tax on business supplies and equipment. The partial repeal, an $18 million to $19 million tax cut, has backing from the Idaho School Boards Association and the Idaho Association of School Administrators.

But this is not the sole personal property tax repeal bill in the hopper. On Friday, Revenue and Taxation will consider the Idaho Association of Commerce and Industry’s bill.

IACI has been working all session on a more ambitious repeal bill — which could bring big businesses a larger tax break, but could also have a more profound impact on public schools. The IACI bill carries a $120 million cost, according to the Associated Press.

Personal property tax
Seth Grigg, Idaho Association of Counties

But on Thursday, Revenue and Taxation heard from Seth Grigg of the Idaho Association of Counties, who represented the partial repeal bill — a collaborative effort involving counties, the Association of Idaho Cities, ISBA and IASA.

The centerpiece of the bill is a repeal that would cover up to $100,000 of personal property per business, which would eliminate the tax for 89 percent of Idaho businesses.

This isn’t a new concept. The 2008 Legislature passed a similar repeal law. But the repeal was triggered to growth in state revenue, targets that were never met during a protracted economic downturn. As a result, the tax remains on the books for all businesses, large and small.

While the personal property tax is unpopular with businesses, partly because of its cumbersome reporting requirements, it has remained an important source of revenue for local governments. According to State Tax Commission estimates, public schools collected $38.6 million in personal property taxes in 2012 — more than the $33.4 million collected by cities, and roughly the same as the $38.9 million collected by counties.

HB 272 would replace the $18 million to $19 million of personal property tax, through an annual appropriation from the state’s general fund. This would essentially shift the cost to sales or income tax collections.

The reimbursement plan addresses one key concern voiced by local governments and education groups — and a concern shared by Idaho Education Association executive director Robin Nettinga, who attended Thursday’s committee hearing. IEA has no position on the bill introduced Thursday, but Nettinga said her group would oppose any personal property tax cut that places further pressure on the school budget.

And while HB 272 has backing from the school boards and the school administrators, state superintendent Tom Luna has no position on it. Luna hasn’t seen either of the competing personal property tax bills, spokeswoman Melissa McGrath said Thursday.

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Rep. Gary Collins, R-Nampa

Since January, the personal property tax issue has simmered behind the scenes. The introduction of the first repeal bill — on the 60th day of the 2013 legislative session — drew a full contingent of lobbyists to the Rev and Tax meeting room.

Said committee Chairman Gary Collins, R-Nampa, as he gazed at the room at the start of the meeting, “We evidently have some non-controversial legislation today.”

Read more: Go to the EDge blog for a refresher course on the personal property tax — and the stakes for Idaho schools.

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