The first stab at a $141 million repeal of the personal property tax is not “workable,” says Karen Echeverria, executive director of the Idaho School Boards Association.
The ISBA has joined cities and counties in opposition to Gov. Butch Otter’s proposal, which began circulating last week. The proposal hasn’t been formally introduced in bill form — but, according to media reports, it would phase out the tax on business equipment and supplies over six or seven years.
The school boards have several concerns, Echeverria said Monday.
• First, the bill would not completely cover the cost of the repeal — and its impact on local governments that rely on the personal property tax. The proposal would cover about $90 million of the $141 million — although some local governments would fare better than others. Urban renewal districts are specifically shut out; they received about $9.2 million in 2012, according to State Tax Commission estimates.
But because the proposal does not cover the entire cost of personal property tax repeal, the proposal would cause “a significant shift in property tax burden to homeowners, farms, and small businesses,” Echeverria, Idaho Association of Counties Executive Director Dan Chadwick and Association of Idaho Cities Executive Director Ken Harward said Friday in a letter to Otter.
• Second, this proposal would have long-term effects on school districts — especially those that rely on two-year, voter-approved supplemental levies. “This (tax shift) will make passing school bonds and supplemental levies significantly more difficult,” according to the letter.
Otter spokesman Jon Hanian offered few details about the “working draft” of a proposal. “It is being used for discussion purposes for what will appear in the version that will be up for introduction soon,” Hanian said in an email. “So I do not have a document or specific details to share with you at the moment. Stay tuned.”
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The local governments recommend something of a “Back to the Future” alternative. They want the Legislature to enact the 2008 law that would cover $100,000 of personal property tax. This law was tied to state revenue targets that have never been met, so the tax cut has never been enacted. But this partial repeal would cover the personal property tax bill for 89 percent of Idaho businesses, and would fit within the $20 million Otter has earmarked to bankroll personal property tax relief.
For more reading, here is our in-depth look at the personal property tax repeal, and its potential impact on schools.
And here is a guest opinion in the Times-News in Twin Falls, co-signed by more than 30 local officials in the Mini-Cassia region — including several school administrators who testified at last week’s House-Senate education “listening session.”
And for still more reading, here is the full text of Friday’s letter to Otter:
“Thank you for the opportunity to comment on the proposed personal property tax legislation provided to us by your office this week. We are grateful for your willingness to consider the impacts that exempting personal property would have on local governments, and we appreciate your assurance that the essential services provided by local governments should be protected.
Local elected officials are concerned that the proposed legislation, which also includes an exemption for operating property (utilities, railroads, etc.), will be an untenable burden on the state general fund at a time when Idaho’s economy is growing slowly and state revenue growth is uncertain. Furthermore, the legislation will result in a significant shift in property tax burden to homeowners, farms, and small businesses. This will make passing school bonds and supplemental levies significantly more difficult. Therefore, our associations do not support the proposal.
“We do, however, support triggering the exemption provided by House Bill 599, passed in 2008. This would provide an exemption of $100,000 of personal property per taxpayer, per county, which would fully exempt 89 percent of Idaho businesses from personal property taxes. The fiscal impact of the exemption established by HB 599 is a much more manageable $20 million per year, which fits the amount provided in your budget for tax relief. Because this legislation provides full replacement revenues, it will not result in a shift of tax burden from businesses to homeowners.
“We appreciate your consideration of this important issue and the impacts that personal property tax legislation may have on schools, law enforcement, fire protection, roads, and other local services essential to the environment needed for businesses to flourish.
“Our associations pledge that we will continue to work with you and the other stakeholders in an effort to advance the best legislation for the citizens of Idaho.”