vision2020
Proposed Idaho Tax Cut Package
Dear Visionaries:
A great deal of time and effort has been spent the tax package proposed by
the Governor. The original package was $140 million and by the time it left
the House, it was up over $200 million. We talk about a $330 million
surplus; however, like Alan Greenspan notes, "Much of those calculations
are phantom dollars not yet in the bank." And so it is with the Idaho
"surplus." I remember that when we first arrived in January in Boise that
only $100 million was actually in the bank. Many of the calculations were
based future economic growth in the state and projected taxes flowing to
the treasury. Our economic growth rate is projected to be about 6% this
year; however, there are more and more signs of a recession. H-P talks
about laying off workers in the high tech section. Rural recession in the
ag and timber area is accelerating, and the high cost of energy is an added
constraint in economic development. So we may simply not have the $330
surplus in reality.
I will support a tax cut package, but I'd like to see much more in terms of
property tax relief for taxpayers and for farmers. We also need to put
more of the surplus in the "Rainy Day Fund" which JFAC has done. We need
some protection against possible hold backs and having to raise taxes if
our calculations for the future are wrong. In 1953 a major tax cutting
program Idaho failed because economic growth went flat. As a consequence,
LCSC was shut down. On the other hand, tax cut efforts do stimulate
economic growth. Gov. Jane Hull, Arizona, reported 10 years of tax cuts
had stimulated economic growth in Arizona. Trying to find the right balance
is the secret. We also need to consider future liabilities in terms of
funding public school construction. Gov. Kempthorne and the Legislature
still stand by the 11th amendment- "The State shall not be involved in
brick and mortar for schools." However, in case after case, when states
have refused their constitutional obligation to provide for a safe learning
environment, these judges have dictated the state to come up with
substantial sums of money to fix the problem. This happened in
Arizona. It cost the state over $400 million. We need to be proactive,
and there are ways of using property tax relief to help with improving
school facilities.
The total of the package is too big. One result already is a public school
budget that provides too little to improve pay for starting teachers, and
fails to help schools provide staffing needed to help students meet the
exiting standards this legislature has mandated. With HB 275 there is
nothing left to provide state aid to schools for repair and construction of
buildings. The system of relying on property tax for almost 100 percent of
the cost of school buildings is not working. The age of the average school
building in Idaho is almost 60 years.
After the next fiscal year, the impact gets worse. If the economy does not
slow down, if the revenue projection for the fiscal year is realized, it
would require five per cent revenue growth for fiscal 2003 to support
general fund budgets providing zero increase for public schools,
universities, community colleges and professional technical schools.
The proposed tax cut package misses thousands of Idaho households.
According to the Tax Commission there were 108,000 tax filers who had state
income tax liability. This includes a family of four at $19,000 income or
a mother with two children at $16,000. These people pay property tax, sales
tax, fuel tax, social security withholding tax and excise taxes. They are
as deserving of tax relief as families at $75,000. They get nothing from
the $91 million income tax rebate or anything from ongoing income tax
cuts. Taxpayers who receive a rebate will also have to pay federal tax on
the rebate.
The tax cut proposal gives only token relief to thousands more. Another
130,000 tax filers with a taxable income of zero to $10,000 will get an
average rebate of $32. These 130,000 and 108,000 who get nothing from
income tax cuts are nearly half of all income tax filers. The tax package
would also gives less tax relief to middle income families than they would
receive with a reduction or elimination of the grocery tax. A family of 4
at a $35,000 income gets less than $100 from the ongoing tax cut. They
would get three times as much with elimination of the grocery tax. At
least 80 per cent of all households would get more tax relief with the
elimination of the grocery tax. As pointed out with the state income tax
cut, many Idahoans will pay more state and federal tax. A large part of the
income tax cuts will go to Washington. Grocery tax cuts stay in the
community and are spent there.
I'd support a smaller tax package coupled with increasing the amount going
to our Rainy Day fund. I'd support a smaller one time individual and
corporate tax cut, but not make it permanent. I support the current package
to provide farmers with personal property tax relief; however, we could
take $60 million to pay off about 10 percent of the school bonds in the
state ($600 million total). Every district would benefit, and this would be
a significant one time tax cut that would benefit everyone. The Governor's
rural economic development plan deserves support along with research and
development tax credits, capital gains, and venture capital.
With the surplus, this legislature can provide significant tax relief to
all Idahoans and still keep it's obligation to provide quality educational
and other services to it's citizens. HB 275 is now in the Senate, and it
will be interesting to see what changes are made there.
Rep. Tom Trail, district 5
ttrail@house.state.id.us
Phone: 208-332-1202
I would like constituents to contact me by e-mail me with their ideas,
comments and recommendations.
Legislative newsletters and additional materials and information can be
located on my web
and home page http://www.infotrail.com/idaho
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