House panel approves $35 million tax cut to spur job creation

Some Idaho residents and businesses came one step closer Tuesday to having their state tax burdens lowered after the House Revenue and Taxation Committee approved a measure to do just that.

The bill, sponsored by Rep. Mike Moyle, R-Star, would lower the tax rates for top wage earners and businesses in the state. In all, the measure is expected to cut revenues by $35.7 million next year if it passes.

The measure would bring down LLC and individual tax rates from 7.8 percent to 7.4 percent and larger corporate rates would drop from 7.6 percent to 7.4 percent.

Moyle said his measure would spur job creation in the state by signaling that the state is business-friendly. “It makes Idaho more competitive with surrounding states,” Moyle said. “It also makes Idaho known on the map and sends the message to the world that Idaho is open for business.”

Gov. Butch Otter spurred tax cut talk when he endorsed the idea in his 2012 State of the State address and budgeted $45 million in unspecified revenue reduction in his 2013 budget. There was no finite tax cut details, Otter said, because he wanted lawmakers to figure out the best way to apply the reductions to spur the economy.

David Hensely, Otter’s top deputy, told committee members that the governor backs the measure as a way to aid existing Idaho businesses and attract new companies to the state. “The governor believes that all this is possible through this legislation,” Hensely said. “This is a good first step and we hope to do more.”

Donna Yule, head of the Idaho Public Employee Association, testified against the bill, saying it would be the “height of irresponsibility” to pass a tax cut measure when funding gaps still exist within state government.

Instead of cutting $35 million from state revenues, Yule suggested, lawmakers should examine restoring Medicaid cuts made last year, which matched the fiscal amount in the proposed tax reduction. “It seems it would be more responsible to restore funding in many areas that have been cut in the past couple years than to give money back in tax relief,” Yule said. “State government needs to have adequate funds to provide crucial government services.”

Jeff Sayer, head of the Idaho Department of Commerce, voiced support for Moyle’s bill, saying it would help his agency attract new businesses to the state. “One of the challenges we have is our tax rate is not competitive,” Sayer said, adding that corporate site-selectors look for low tax rates when assessing company relocation prospects.

Additionally, Sayer noted, the tax cut would indicate Idaho could be a safe harbor for businesses in states looking to fill their budget gaps with higher rates. “The message this would send to the nation is significant,” Sayer said.

Rep. John Rusche, D-Lewiston, said he opposed the bill because he sees deep needs in state government that aren’t being addressed, including Medicaid funding, raises for state workers and maintenance of Idaho’s roads. “I don’t think it’s responsible to cut taxes when we can’t meet our needs,” Rusche said. “How is it responsible to cut taxes when we can’t pay current expenses?”

Rusche also objected to the cuts because only those in upper income brackets would receive them while those in the lower wage echelons are still paying taxes on food and other necessary expenses. “I just don’t think it’s fair,” Rusche said.

The committee voted 13-4 to approve the measure, which now heads to the House floor.

Committee chair Dennis Lake, R-Blackfoot, sided with three panel Democrats in opposition to the measure. During testimony, Lake suggested it would be unwise to cut revenues and eliminate surpluses that help fill reserve accounts. Without the reserves, Lake said, Idaho would have been forced to raise taxes through the past few years as revenues sagged due to the poor economy.

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