The House Revenue and Taxation Committee on Jan. 29 voted to print, for further discussion, a proposal to make the state’s Small Employer Incentive Act accessible to more businesses.
No companies have used the law, which the Idaho Legislature passed in 2005 in hopes of attracting highly paid jobs, Don Dietrich, Idaho Department of Commerce division administrator for economic, community and rural development, said in an interview.
The existing law requires small employers to invest $500,000 in new plant and facilities, and to create 10 new jobs paying at least $19.23 an hour. Such employers qualify for an investment tax credit of 3.75 percent instead of the standard 3 percent, a real property credit against income tax of 2.5 percent, and a new-jobs income tax credit.
“If a company hires more than 10 employees, the computation used to determine the average wage of new employees in excess of 10 is overly restrictive,” Dietrich said.
Now, the next 10 jobs must average $15.50 an hour. The formula counts all employees, but it only counts wages from $12 to $48.08; an employee earning less than $12 must be offset by someone earning $31 to reach the required $15.50 average.
Under the proposed change, every job below the $48.08 threshold could be added up and divided by the total number of employees, and the average must be at least $15.50. Dietrich said the change would not penalize companies for having support positions below $12 an hour, but it would prohibit companies from using people who earn more than $48.08 an hour to offset a large number of minimum-wage jobs.
For example, an employer could count individual employees earning $20, $18, $15 and $10 an hour – the total is $63 and the average is an incentive-qualifying $15.75. Now the $10 employee’s job is counted but the wage is not, so the four positions are divided into $53 for an average of $13.25.
Companies that looked to enter Idaho often commented on the problem with the existing formula, Dietrich said.
“If there is a tool in the toolbox that you can’t use, it’s kind of worthless to everyone,” he said. “What this does is open the door to more companies.”
Dietrich added: “We’re trying to get some smaller businesses in the game. This is part of our efforts to diversify, and our efforts in rural communities.”
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