The plethora of goods and services exempt from Idaho sales and income taxes has lawmakers wondering if the time has come to curb the exemptions. More than 100 exemptions for sales and income taxes keep millions of potential tax revenue out of state coffers, state officials say............One of the newest sales tax exemptions is a break for companies that buy equipment to build wind farms or other alternative energy projects. Tax officials say this makes Idaho more competitive with states like Montana and Oregon that don't have sales taxes.

The plethora of goods and services exempt from Idaho sales and income taxes has lawmakers wondering if the time has come to curb the exemptions.

More than 100 exemptions for sales and income taxes keep millions of potential tax revenue out of state coffers, state officials say.

On Friday the Legislature's Tax Exemption Interim Committee heard testimony from on Idaho's tax policy and got a crash course from state economists and tax experts on the exemptions.

The goal was to identify which exemptions should be considered for either elimination or revision by the Legislature. The goal wasn't met Friday, but it might be at the committee's next meeting in October.

"Every exemption has a reason and a logical and defendable reason," Sen. Brent Hill, R-Rexburg, the committee co-chairman, told the committee. "But if you see some that are less defendable or less reasonable than others, you might want to highlight that."

Perhaps foreshadowing the upcoming session, the day's discussion quickly showed how some exemptions might be more favored then others. Rep. Dell Raybould, R-Rexburg, introduced a motion to prohibit the panel from changing any of the 17 original tax exemptions granted by the Sales Tax Act of 1965.

Those exemptions include things like electricity, water and production equipment.

The production exemption was aimed primarily at agriculture so farmers wouldn't have to pay taxes on equipment used in crop production. Today its users include ski resorts that pay no taxes on lifts or groomers. In fiscal year 2007, the exemption kept nearly $84 million out of state coffers, officials estimate.

Raybould's motion failed on a tie vote after some members objected to taking any exemption off the table before they had the opportunity to review it.

Sen. Joe Stegner, R-Lewiston, said no exemption should be sacred. He said there could be a way to revise or eliminate the production tax exemption to eliminate a personal property tax.

"When I was in business I would have gladly traded my personal property tax bill that kept coming year after year for the sales tax benefit I received on buying equipment when times were good," he said.

Narrowing down what the panel should look at proved to be more difficult than expected.

The committee determined it needs criteria by which to judge each exemption. "We need to have a rationale or otherwise our decisions will look arbitrary," said Rep. Nicole LeFavour, D-Boise. Committee members were asked to suggest criteria before the October meeting.

Committee members said they aimed to keep any changes as revenue-neutral as possible. The committee passed a motion by Stegner that requires any elimination of an exemption that brings more than $10 million a year in tax revenue to be offset with a similar tax reduction in another area.

Alternative energy projects

One of the newest sales tax exemptions is a break for companies that buy equipment to build wind farms or other alternative energy projects. Tax officials say this makes Idaho more competitive with states like Montana and Oregon that don't have sales taxes.

 

Web link: http://www.idahostatesman.com/business/story/12470...