<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font face="Calibri"
size="3">LEGISLATIVE NEWSLETTER XII</font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font face="Calibri"
size="3">Constituents:</font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt">
<p><font face="Calibri" size="3"> </font></p>
<font size="3"><font face="Calibri"><span style="mso-spacerun:
yes"> </span>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.<span style="mso-spacerun:
yes"> </span>Representatives from the Idaho Education
‘Association, Idaho Labor Unions, business interests, and the
community attended.<span style="mso-spacerun: yes">
</span>I’ve decided to share the comments that I made at the press
conference in this newsletter.<span style="mso-spacerun: yes">
</span>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.<span
style="mso-spacerun: yes"> </span>Rep. Lake said that he liked
many components of the proposal.<span style="mso-spacerun:
yes"> </span>He also stated that the major theme of the 2011
legislative session will be tax reform.<span style="mso-spacerun:
yes"> </span>I consider Rep. Lake’s comments to strongly
indicate what the major thrust will be of the next session.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>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.<span style="mso-spacerun: yes"> </span>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.<span style="mso-spacerun: yes"> </span>Actually
Washington State is far ahead of us with more than 500 tax exemptions, but
my favorite is their tax exemption on bull semen.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>During the election cycle the word is that one should not talk
about tax reform because it might damage your credibility at the
polls.<span style="mso-spacerun: yes"> </span>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.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri">Rep. Tom Trail
<p> </p>
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<p><font face="Calibri" size="3"></font></p>
</p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><strong
style="mso-bidi-font-weight: normal"><u><font size="3"><font
face="Calibri">IDAHO EDUCATION AT THE CROSSROADS (Education Funding Press
Conference)
<p> </p>
</font></font></u></strong></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes"> </span><span
style="mso-spacerun: yes"> </span>Idaho public and
higher education are at a cross roads.<span style="mso-spacerun:
yes"> </span>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<span style="mso-spacerun:
yes"> </span>turn-around occurs.<span style="mso-spacerun:
yes"> </span>The Idaho Constitution clearly
outlines that we have a constitutional obligation to provide a thorough
and uniform education for our children.<span style="mso-spacerun:
yes"> </span>This obligation clearly signifies that we
need to provide the resources both to K-12 students but also for students
in higher education.<span style="mso-spacerun: yes"> </span>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.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>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.<span style="mso-spacerun:
yes"> </span>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.<span style="mso-spacerun: yes">
</span>In 1985 higher education received almost 17 percent of the state
budget.<span style="mso-spacerun: yes"> </span>This has
declined to about 8 percent today.<span style="mso-spacerun:
yes"> </span>Priority programs have been
eliminated, class sizes have increased.<span style="mso-spacerun:
yes"> </span>Top researchers and teachers are leaving
for better opportunities. <span style="mso-spacerun:
yes"> </span>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.<span style="mso-spacerun: yes">
</span>The universities prepare our workforce to move our economy
ahead.<span style="mso-spacerun: yes"> </span>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.<span
style="mso-spacerun: yes"> </span>We need to invest and
maintain that investment in the future.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes"></span>
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>Constitutionally we have to balance the budget.<span
style="mso-spacerun: yes"> </span>Our
governor<span style="mso-spacerun: yes"> </span>and legislators all
support <span style="mso-spacerun: yes"> </span><span
style="mso-spacerun: yes"> </span>K-12 and higher education---no one
questions their commitment and setting education as one of <span
style="mso-spacerun: yes"> </span>the highest priorities in the
state, but current times and conditions indicate that we must<span
style="mso-spacerun: yes"> </span>do a great deal more.<span
style="mso-spacerun: yes"> </span></font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>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.<span style="mso-spacerun: yes">
</span>The Idaho Economic Recovery Act would reduce the 6% sales tax to
5%.<span style="mso-spacerun: yes"> </span>This would
benefit low income families and make us more competitive with other
states.<span style="mso-spacerun: yes"> </span>Additionally we
propose that services be taxed at the 5% level and certain exemptions
eliminated.<span style="mso-spacerun: yes"> </span>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.<span style="mso-spacerun:
yes"> </span>Production/agricultural exemptions
would not be touched and there would be no tax on health services.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>Why propose this now instead of at the start of the next
session?<span style="mso-spacerun: yes"> </span>We feel that
education is at the crossroads in Idaho and that this proposal could help
fill in the gap.<span style="mso-spacerun: yes">
</span>In addition we would have a fairer and more equitable tax system.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>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.”<span style="mso-spacerun: yes"> </span>Our
teachers put in over 10 hours a day for five days a week and devote more
time on weekends.<span style="mso-spacerun: yes"> </span>Idaho ranks
41st in the U.S. in teachers’ salaries and 47th in expenditures per
student.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes"> </span><span
style="mso-spacerun: yes"> </span>Again,<span
style="mso-spacerun: yes"> </span>we are offering an alternative to
the governor and law makers of the state, and would hope that the proposal
is given attention.<span style="mso-spacerun: yes"> </span>As
Abraham Lincoln once said, “if you think education is expensive, try
ignorance.”<br /></font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt">
<p><font face="Calibri" size="3"> </font></p>
<strong style="mso-bidi-font-weight: normal"><u><font size="3"><font
face="Calibri">Sales tax exemptions—the sleeping giant in
Idaho’s tax system
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</font></font></u></strong></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt">
<p><font face="Calibri" size="3"> </font></p>
<font size="3"><font face="Calibri"><span style="mso-spacerun:
yes"> </span>Idaho grants exemptions to the sales
tax that are worth more than the taxes it collects.<span
style="mso-spacerun: yes"> </span>Meanwhile Idaho can’t pay
for the schools and services it wants.<span style="mso-spacerun:
yes"> </span>This should be the issue for the 2011 Legislative
Session and candidates should start talking about it now.<span
style="mso-spacerun: yes"> </span>Idaho has about 75 tax breaks,
exceptions and exemptions that have been debated, it seems, since Idaho
first passed the sales tax in 1965.<span style="mso-spacerun: yes">
</span>Past legislatures have studied the issue, making only token
changes.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>In 2010-11 Idaho is expected to collect about $989 in sales taxes,
while the exemptions are worth more than $1.7 billion.<span
style="mso-spacerun: yes"> </span>It is time for serious discussion
in 2011.<span style="mso-spacerun: yes"> </span>Most of the
state’s vital services—including education, universities,
Medicaid and prisons have sustained cuts of historic magnitude.<span
style="mso-spacerun: yes"> </span>Everyday Idahoans are feeling the
pain and the effects will become even more evident in the months to
come.<span style="mso-spacerun: yes"> </span>The 2011
Legislature will be forced to budget without a net.<span
style="mso-spacerun: yes"> </span>The state has drained its reserves
and used federal stimulus dollars to limit cuts.<span style="mso-spacerun:
yes"> </span>This is beyond dispute.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>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.<span style="mso-spacerun: yes"> </span>But a
narrow sales tax doesn’t help.<span style="mso-spacerun: yes">
</span>Because the sales tax exempts many purchases and services, it
subject to the whims of the retail market.<span style="mso-spacerun:
yes"> </span>Idaho’s sales tax hinges on consumer confidence,
which has fallen during the Great Recession.<span style="mso-spacerun:
yes"> </span>If the sales tax is applied more broadly, even at a
lower rate, it would be a more resilient, reliable source of funding.<span
style="mso-spacerun: yes"> </span>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.<span style="mso-spacerun: yes">
</span>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.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>We need to set up a system to review exemptions.<span
style="mso-spacerun: yes"> </span>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.<span style="mso-spacerun:
yes"> </span><span style="mso-spacerun: yes"> </span>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.<span style="mso-spacerun:
yes"> </span>It is a tough sell, for example, to repeal the
exemption for medical services, Idaho’s biggest tax break.<span
style="mso-spacerun: yes"> </span>In the Trail and Huntley tax
proposal tax on medical services is left alone.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>The production exemptions cover equipment and supplies used by
manufacturers, farmers, loggers and other businesses.<span
style="mso-spacerun: yes"> </span>These are politically popular
breaks.<span style="mso-spacerun: yes"> </span>Supporters also have
a good double taxation argument.<span style="mso-spacerun: yes">
</span>They say that it’s unfair to tax the goods used to create
taxable products.<span style="mso-spacerun: yes"> </span>Again,
under the Trail/Huntley proposal—production exemptions are off the
table.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>Let’s take a look at what makes up the $1.7 billion in Idaho
tax exemptions.<span style="mso-spacerun: yes"> </span>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,<span style="mso-spacerun: yes"> </span>$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.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>A discussion of the tax breaks should be one the table, but more
important is setting some parameters.<span style="mso-spacerun:
yes"> </span>The sales tax should be made fairer and brought in line
with a modern service oriented economy.<span style="mso-spacerun:
yes"> </span>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.<span style="mso-spacerun: yes"> </span>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.<span
style="mso-spacerun: yes"> </span>In the end we must begin building
a tax structure for Idaho’s future.
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt"><font size="3"><font
face="Calibri"><span style="mso-spacerun: yes">
</span>This is a long newsletter but a critical one in my opinion.<span
style="mso-spacerun: yes"> </span>Please contact me at
ttrail@moscow.com
<p> </p>
</font></font></p>
<p class="MsoNormal" style="MARGIN: 0in 0in 10pt">
<p><font face="Calibri" size="3"> </font></p>
<font face="Calibri" size="3">Rep. Tom Trail</font></p>