House could look at all sorts of tax and fee changes (video)

A tightening budget and slow economy could lead state lawmakers to consider changes to boost revenue for the state or private companies. Increasing taxes for cigarettes, alcohol, and Internet sales are some of the ideas on the table, while business interests are asking for reductions to the corporate income tax and personal property tax.

All of these changes would likely get their start in the House Revenue and Taxation Committee, led by Rep. Dennis Lake, R-Blackfoot. Lake said he thinks the committee could take steps to collect sales tax revenues on Internet sales. Idaho has considered joining the Streamlined Sales Tax Compact, a multi-state effort to simplify taxes in order to collect sales taxes on purchases from companies outside the state.

Just last year, the Senate passed the plan, before it stalled in the House. Lake said he think it would fare better this year.

If implemented, the tax change could bring in $30 million a year. Idahoans are currently required to pay taxes on Internet purchases when they file their taxes, though few do. The plan is backed by some business groups, including the Idaho Retailers Association, which represents brick-and-mortar stores in the state. However, Sen. Dean Cameron, R-Rupert, said it’s unclear whether the Internet sales tax would pass in the Senate this year.

The search for additional revenue is important as the Legislature begins writing its next budget. Legislative budget analyst Cathy Holland-Smith said that even after identifying more than $100 million in targeted reductions, the state budget for the next fiscal year would still be short at least $200 million.

The most recent state revenue news is also somewhat bleak. Preliminary collections reported by the Idaho Tax Commission show the state took in $12 million less than forecasted in December. That breaks a five-month streak of revenues topping expectations.

Lawmakers looking at raising some smaller fees and taxes say the extra money wouldn’t completely offset looming cuts, but would keep some programs whole. Rep. Wendy Jaquet, D-Ketchum, said she’s focused on preserving funding for education. She said people’s expectations of state services is clashing with a desire for low taxes.

Jaquet said she’d look at raising taxes on beer and wine and potentially the “head tax” on income tax filing fees, and back reforms to the Tax Commission and dyed diesel fuel that could bring in millions more in revenue. She said she’d need support from Republicans to get any revenue increases out of Lake’s committee.

Lake said that he’d prefer to look at raising beer taxes and wine taxes separately. A plan to raise them two years ago, which would have generated $19 million, failed.

Not all the discussion will be about raising taxes and fees. Some lawmakers and business groups are arguing for tax reductions to spur economic growth, which would generate a larger tax base for Idaho in the future.

Alex LaBeau, the president of the Idaho Association of Commerce and Industry, told a panel of lawmakers Friday that they should consider lowering the 7.8 percent corporate income tax and removing the personal property tax on business machinery, tools, and equipment.

“In order to grow this state, you have to invest in economic development,” LaBeau said. He said while Idaho has a nice quality of life, the corporate income tax is a barrier to out-of-state companies picking up stakes and moving to Idaho. “While this is not the deciding factor, make no mistake – it is a factor.”

Lake has said that he’d hold hearings on other tax proposals, including sales tax exemptions, if lawmakers introduce them during the legislative session.