[Vision2020] Legislative Newsletter XII

[Rep. Tom Trail]

LEGISLATIVE NEWSLETTER XII
Constituents:


 
     This past week Bob Huntley and I held
a press conference in Boise concerning the deteriorating conditions of
funding for K12 and Higher Education in Idaho.   Representatives from the Idaho Education
‘Association, Idaho Labor Unions, business interests, and the
community attended.  
I’ve decided to share the comments that I made at the press
conference in this newsletter.  
Several weeks ago, Rep. Dennis Lake, Chairman of the House Rev and
Tax Committee came to my office and asked me for a copy of a tax proposal
that Bob Huntley and I had developed several years ago.   Rep. Lake said that he liked
many components of the proposal.   He also stated that the major theme of the 2011
legislative session will be tax reform.  I consider Rep. Lake’s comments to strongly
indicate what the major thrust will be of the next session.

 

    
I’ve also included a summary report of sales tax exemptions
which are at the heart of an unequal and unfair part of the Idaho Tax
System.   Sen. Schroeder
and I as well as several other legislators had legislative proposals to
sunset and review all of the 75 tax exemptions that we have on the books
in this state.  Actually
Washington State is far ahead of us with more than 500 tax exemptions, but
my favorite is their tax exemption on bull semen.

 

    
During the election cycle the word is that one should not talk
about tax reform because it might damage your credibility at the
polls.   My take is that
since it will obviously be the ISSUE for the coming session (beside jobs
and economic development) that now is the time to begin the debate.

 

Rep. Tom Trail

 





IDAHO EDUCATION AT THE CROSSROADS (Education Funding Press
Conference)

 

      Idaho public and
higher education are at a cross roads.    Our educational infrastructure has suffered
from the cutbacks of the past few years, and it is likely suffer more in
the coming few years unless a dramatic  turn-around occurs.     The Idaho Constitution clearly
outlines that we have a constitutional obligation to provide a thorough
and uniform education for our children.    This obligation clearly signifies that we
need to provide the resources both to K-12 students but also for students
in higher education.  This
year’s budget for K-12 is down about 7 percent, and higher education
has suffered a 22 percent loss during the past two years.

 

    
Idaho elected officials are strong supporters of public education
and I’ve heard the governor note that we must do our best to prepare
Idaho students to compete in the world economy.  But when we have schools that have gone to four day
school days, increased class sizes, and we have lowered our support for
school resources, this raises the question of whether or not we are
meeting our constitutional obligation to provide a thorough and uniform
education for our K-12 students. 
In 1985 higher education received almost 17 percent of the state
budget.    This has
declined to about 8 percent today.     Priority programs have been
eliminated, class sizes have increased.    Top researchers and teachers are leaving
for better opportunities.  Fees for students are increasing by 10-12 percent per
year and the average four year graduate leaves their alma mater with over
$20,000 in debt.   
The universities prepare our workforce to move our economy
ahead.  Businesses looking to
locate in Idaho place a high value on the K-12 and higher education
programs in the state and how they are supported.    We need to invest and
maintain that investment in the future.

 



 

    
Constitutionally we have to balance the budget.     Our
governor  and legislators all
support   K-12 and higher education---no one
questions their commitment and setting education as one of  the highest priorities in the
state, but current times and conditions indicate that we must  do a great deal more.   
    
Mr. Huntley and I are proposing an alternative to the governor and
others that we feel could help us adequately support education and other
critical state services.   
The Idaho Economic Recovery Act would reduce the 6% sales tax to
5%.    This would
benefit low income families and make us more competitive with other
states.   Additionally we
propose that services be taxed at the 5% level and certain exemptions
eliminated.    The
net return to the state as calculated by the Idaho State Tax Commission
would be approximately $190 million which could be used for supporting our
educational infrastructure.     Production/agricultural exemptions
would not be touched and there would be no tax on health services.

 

    
Why propose this now instead of at the start of the next
session?   We feel that
education is at the crossroads in Idaho and that this proposal could help
fill in the gap.   
In addition we would have a fairer and more equitable tax system.

 

    
Lee Iacocca said, “in a completely rational society, the best
of us would aspire to be teachers and the rest of us would have to settle
for something less, because passing civilization from one to the next out
to be the highest honor and highest responsibility anyone could
have.”   Our
teachers put in over 10 hours a day for five days a week and devote more
time on weekends.  Idaho ranks
41st in the U.S. in teachers’ salaries and 47th in expenditures per
student.

 

      Again,  we are offering an alternative to
the governor and law makers of the state, and would hope that the proposal
is given attention.   As
Abraham Lincoln once said, “if you think education is expensive, try
ignorance.”



 
Sales tax exemptions—the sleeping giant in
Idaho’s tax system

 



 
     Idaho grants exemptions to the sales
tax that are worth more than the taxes it collects.  Meanwhile Idaho can’t pay
for the schools and services it wants.   This should be the issue for the 2011 Legislative
Session and candidates should start talking about it now.  Idaho has about 75 tax breaks,
exceptions and exemptions that have been debated, it seems, since Idaho
first passed the sales tax in 1965. 
Past legislatures have studied the issue, making only token
changes.

 

    
In 2010-11 Idaho is expected to collect about $989 in sales taxes,
while the exemptions are worth more than $1.7 billion.  It is time for serious discussion
in 2011.   Most of the
state’s vital services—including education, universities,
Medicaid and prisons have sustained cuts of historic magnitude.  Everyday Idahoans are feeling the
pain and the effects will become even more evident in the months to
come.   The 2011
Legislature will be forced to budget without a net.  The state has drained its reserves
and used federal stimulus dollars to limit cuts.  This is beyond dispute.

 

    
Idaho would have a budget crisis under any circumstance: sales,
personal and corporate income tax collections all dropped by more than 10
percent in 2008-09.  But a
narrow sales tax doesn’t help. 
Because the sales tax exempts many purchases and services, it
subject to the whims of the retail market.  Idaho’s sales tax hinges on consumer confidence,
which has fallen during the Great Recession.  If the sales tax is applied more broadly, even at a
lower rate, it would be a more resilient, reliable source of funding.  Gov. Butch Otter and former
Secretary of State, Pete Cenarrusa, say it may be time to examine
exemptions written for an economy that has changed from a production to
service oriented economy. 
Even leaders in the Idaho business community including Steven
Ahrens, former lobbyist for the Idaho Association of Commerce and Industry
sees sales tax change as part of reforming the Idaho tax system.

 

    
We need to set up a system to review exemptions.    Exemptions are not a
right, but a privilege granted by the State in the belief that the
exemption is for the greater good of the state.   All
exemptions should be reviewed in a timely manner, and those organizations
who are granted the exemption should be able to justify and prove their
specific exemption should be continued.   It is a tough sell, for example, to repeal the
exemption for medical services, Idaho’s biggest tax break.  In the Trail and Huntley tax
proposal tax on medical services is left alone.

 

    
The production exemptions cover equipment and supplies used by
manufacturers, farmers, loggers and other businesses.  These are politically popular
breaks.  Supporters also have
a good double taxation argument. 
They say that it’s unfair to tax the goods used to create
taxable products.  Again,
under the Trail/Huntley proposal—production exemptions are off the
table.

 

   
Let’s take a look at what makes up the $1.7 billion in Idaho
tax exemptions.  These include
$41,407,000 for prescriptions and durable medical equipment, $148,000 for
newspaper equipment and supplies, $10,954,000 for lottery tickets and
pari-mutuel betting, $93,964,000 for production exemptions for equipment,
$1,359,000 for funeral caskets, $396,929,000 for health and medical
services, $600,000 for ski lifts, $181,208,000 for professional
services,  $200,000 for
museums, $90,638,000 for utility sales—exempts natural gas, water,
and electricity, $38,263,000 for educational services, $480,000 for clean
rooms for semiconductor manufacturer, $101,430,000 for construction,
$560,000 for precious metal bullion and coins, $71,131,000 for production
exemption for supplies, $151,141,000 for motor fuels—exempts gas
from the sales tax, $84,217,000—information services—local and
long distance telephone and cable services, $118,421,000 for business
services, $3,719,000 for school lunches and senior meals, and $2,550,000
for alternative energy production.

 

    
A discussion of the tax breaks should be one the table, but more
important is setting some parameters.  The sales tax should be made fairer and brought in line
with a modern service oriented economy.  We should reduce our reliance on a retail based sales
tax, and find a balance where Idaho can lower the overall sales tax rate
for everyone.  It is our hope
that this will lead to a system that will lead to stronger support of
Idaho’s educational system and other critical state priorities.  In the end we must begin building
a tax structure for Idaho’s future.

 

    
This is a long newsletter but a critical one in my opinion.   Please contact me at
ttrail at moscow.com

 



 
Rep. Tom Trail
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