Business tax could be dropped

Officials not sure where lost revenue would be made up

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COEUR d'ALENE - Local legislators are divided on whether to do away with a business tax that companies say is burdensome, but county officials call an important revenue source.

The state Senate Pro Tempore Brent Hill distributed a letter to Idaho counties late last month, announcing the state Legislature is considering eliminating the personal property tax for businesses.

Unlike a similar bill from 2008, the letter reads, "the state would not reimburse the counties for the revenues lost as a result of eliminating the personal property tax."

The letter requested counties to comment on how it would affect them.

The answer, according to Kootenai County officials, is badly.

County Commissioner Jai Nelson said the tax is a large funding source for many taxing authorities.

According to county property tax totals, the tax provided $1.2 million for the county in 2010, and $4.6 million for all taxing districts in the county.

"I support the elimination of this, I think this is over burdensome on business," Nelson said, adding that maybe raising other taxes could substitute the revenue. "The issue is, what are the consequences of phasing this out? How do we do it?"

Commissioner Dan Green affirmed that the personal property tax is an important revenue stream for counties.

"We'd have to look at serious reductions of services potentially across the board," he said of if the tax was eliminated with no replacement funds.

Sen. John Goedde, R-Coeur d'Alene, said the tax elimination has been batted around the Legislature for the past several years.

"It sounds to me like if the pro temp is trying to gather some information, that would lead me to believe there must be some push to reconsider it again," Goedde said.

He has heard arguments that by lowering taxes for businesses, Idaho will become more competitive and attract more companies, he said.

"There's a school of thought that will tell you that by making the state more competitive, we will gain businesses and that will increase our revenues," he said.

But he worries if that doesn't happen, the state will simply have to reinstate the tax, he said.

"I think before we do anything along those lines, we're going to have to have our ducks in a row," Goedde said.

Coeur d'Alene Rep. Bob Nonini, also running for state Senate, said he would support scrapping the tax.

Businesses have urged the Legislature to do so because of the arduous processes of calculating personal property, he said.

"We're told it costs more for CPAs to prepare the tax statement than the actual tax bill itself, because it's such a small amount," Nonini said. "It burdens them, and it's cumbersome to business."

Ron Nilson, president and CEO of Ground Force Manufacturing, said there are few businesses in Idaho that wouldn't like to see the tax disappear.

"The average day citizen has no idea the amount of time and energy it takes to account for your personal property tax," he said of submitting a full schedule with assessed value. "The amount of money we pay is almost the amount of time we spend collecting information."

Ground Force spends about 12 to 15 hours on the tax report, he said. The company pays between $10,000 to $15,000 for the tax a year.

He likened the tax to penalizing businesses for purchasing equipment, which makes it harder for Idaho to compete with other states in attracting businesses.

"The amount of time you spend pulling it together ... Time is money for a business," he said.

Nonini said counties could possibly make up for the lost funds by pursuing revenue sharing with cities with sales tax.

"It's just going to take all of us working together to find the right solution," he said.

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