Elected officials across Idaho are expressing a willingness to eliminate the state’s personal

property tax, a long-standing wish of Idaho business owners and would-be business investors.  But for the city and county governments and the school districts that rely on its revenue, the way forward is unclear.

In his annual State of the State Jan. 7, Gov. Butch Otter called for the elimination of the personal property tax, noting that “nearly everyone agrees that it is unfair drag on our economy.” While telling legislators that “whether the tax is eliminated all at once or phased out over a few years is less important to me than an exit strategy that considers our counties’ financial stability.” Otter recommended that elected officials in cities and counties be given the option of raising additional taxes in their local areas to fund essential government services.

Taxing personal property in Idaho is not new; the practice has been in place for more than a century. According to the Idaho State Tax Commission’s website, taxable personal property consists of “items used commercially, such as furniture, libraries, art, coin collections, machinery, tools, equipment, signs, unregistered vehicles, and watercraft.”

The website further states that “taxable personal property also includes items used commercially for convenience, decoration, service, or storage. Examples are store counters, display racks, desks, chairs, file cabinets, computers, typewriters, office machines, and medical/scientific instruments.”

Since Otter’s call to eliminate the tax, discussions among state legislators have turned to options of replacing the tax revenue.

“I think counties need to be a part of it, I think they need to be active players,” Rep. Kelley Packer, R-McCammon, told IdahoReporter.com. “I actually represent a portion of Bannock County, and all of Power County, and Power County has a serious issue with this repeal. It will be devastating and could cripple their county. I refuse to let that happen.”

Packer says she needs more information about how the lost tax revenue would be replaced, noting that “we can’t simply let them repeal the personal property tax, and hope that we can pick up the pieces.”

But at least one county official disagrees. “I support the repeal of the personal property tax, and I think it should be gradually phased-out over a seven-year period,” says Idaho County Commissioner Jim Chmelik. “It’s a double-edged sword for us, in that it would eliminate about $700,000 of revenue for us annually. But I also know that when business owners are able to keep more of their money, they invest in new equipment and employees, and that’s what we need.”

In his speech, Otter left open the possibility of several different kinds of so-called “local option” taxes that could be implemented on local and regional levels to replace the lost revenues.

“People rightly believe that they should be able to control government directly at the ballot box and make decisions that are in the best interest of their local community,” Rep. Grant Burgoyne, D-Boise, told IdahoReporter.com. “Local option gives them that.”

But Chmelik sees it differently. “We already have local option taxes in place,” he says. “They’re called school levies, and the school districts in our area hold elections for additional levies nearly every year.”

Chmelik believes that reducing spending is the solution to the budget dilemma, rather than finding additional tax revenues. “I don’t believe that empowering local politicians to levy more taxes is the solution. It’s time for those of us in elective office to take a hard look at scaling back.”