A proposal to eliminate the personal property tax on businesses will be printed into bill form, the House Revenue and Taxation Committee voted today. Idaho Association of Commerce & Industry President Alex LaBeau presented the proposal on behalf of 23 business organizations. The proposal would eliminate the local taxes that businesses pay on “personal” property such as machinery, equipment and tools. Idaho would pick up the tab over a five-year period starting in fiscal 2010, if state revenue growth is sufficient, LaBeau said.
A similar bill in 2007 passed the House, but died in the Senate – in part due to questions about compensating counties. Under the new proposal, a step-down of personal property tax on businesses would be triggered when Idaho General Fund revenues exceed those of the previous year by 4 percent, LaBeau said. Idaho’s existing budget stabilization and reserve accounts have a similar trigger mechanism, he said.
Most provisions of the proposal come from existing parts of Idaho Code, although the proposal contains some new or more thoroughly explained definitions to ensure that businesses of different types are treated the same, LaBeau said. For example, “fixtures” is not defined in Idaho Code, so the proposal writers used a definition from Colorado, he said. “Improvements” and “operating property” also are expanded upon in the proposal.
Personal property acquired after Jan. 1 of this year would be exempt from local property tax, LaBeau said. Personal property acquired previously would be assessed for this year, to establish a dollar figure that the Legislature can use next year.
A five-year cost range from $110 million to $120 million has been used for planning purposes, LaBeau has said.
Committee members asked about definitions, with some members noting those issues will be addressed when the full bill is considered.
“There is sure to be vigorous debate,” LaBeau said to committee members.
Rep. Nicole LeFavour, D-Boise, voted against the proposal. Sixteen percent of the taxpayers would receive 80 percent of the benefit. With no replacement tax on businesses, families will end up paying, she said.
LaBeau, noting that businesses also pay income and sales taxes, said IACI anticipates the Legislature to eliminate a couple of income tax exemptions.
After the hearing, LaBeau and Jayson Ronk, IACI vice president, said they haven’t heard concerns about the proposal’s timing in light of recently lower Idaho sales and income tax collections.
It’s an opportunity to reinvest in businesses, Ronk said.
“This is the perfect time to do economic stimulus,” LaBeau said.
Suzanne Budge, who leads the Idaho chapter of the National Federation of Independent Business, said business owners would reinvest the personal property tax money in their businesses. “It’s a great investment in existing businesses” as well as a relief to an administrative and compliance burden, she said.
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