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Governor candidates split on Otter special business tax break

Governor candidates split on Otter special business tax break

Wayne Hoffman
August 4, 2017
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August 4, 2017

Republican candidates for Idaho governor are split on a corporate welfare program that Gov. Butch Otter implemented in 2014. Boise businessman Tommy Ahlquist says he would reform it. U.S. Rep. Raul Labrador would opt to repeal the program. Lt. Gov. Brad Little plans to add to it.

The Tax Reimbursement Incentive gives select companies lucrative tax breaks for adding a minimum of 20 jobs in rural areas or 50 jobs in urban areas. Companies doing so can apply to the state Department of Commerce asking the government to excuse up to 30 percent of that business’s tax liabilities.

Related: Don't miss IFF's Faces of Freedom Banquet with Dr. Charles Murray. Click here for details. 

Supporters of the incentive contend the program has generated more than 6,800 jobs at 38 companies spread statewide since its start three years ago. Many others, including me, believe the incentive is anti-free market, harms small businesses that will never qualify for a similar benefit, and that the program creates fewer jobs than advertised because state-subsidized businesses use the tax advantage to poach from the payrolls of other less fortunate companies. Even some of the program's defenders acknowledge its design flaws and would revise it to have it do more for smaller businesses and rural areas.

Little supports the tax incentive, and praises it as a tool that has played a role in the state’s recent economic gains. He says the program is managed in a way that promotes “fairness and transparency.”

“And since the incentive went into effect over three years ago there has been a 4 to 1 return on investment, leveraging new investments and tax revenues to the state. Over 50% of the TRI awards have supported existing Idaho companies expanding in the state, and over half have facilitated job creation in rural Idaho communities,” Little wrote in an email. But the lieutenant governor added that he would revise the law so that it would “provide Idaho’s smaller, rural communities greater opportunities to access this tool; ensure TRI is as fair as possible to Idaho’s existing businesses where it is additive and not detrimental to profitable business; and assures Idaho retains our competitive advantage by leveraging enhanced income opportunities for our businesses and citizens.” (Emphasis Little’s.)

Ahlquist criticizes the incentive program as a component of the state’s “piecemeal approach” to tax policy and would prefer “comprehensive tax reform that ensures our taxes are low, fair, and predictable for all taxpayers.”

“Idaho has the highest income tax in the intermountain region and that is a real problem facing our existing businesses and attracting new businesses to the state to create more good paying jobs for Idahoans,” Ahlquist wrote. “I am open to proper incentives that help Idaho businesses grow and create jobs as well as attract other businesses to the state who do the same with priority always being on existing Idaho companies. TRI cannot be used to pick winners and losers in the marketplace. It must be used in a way that can be beneficial to current Idaho businesses and new businesses. With that in mind, I would support the continuation of TRI with reforms that ensure that existing Idaho businesses—small and large, expanding or remaining constant—have the same playing field as new businesses when it comes to proven incentives that help create jobs and grow our economy.”  

Labrador wrote, “Idaho's taxes are far too high. As governor, one of my top priorities will be to seek tax cuts that benefit ALL Idahoans, not just the lucky few. The Tax Reimbursement Incentive was written with the best of intentionsthat of helping lure new businesses to Idaho and getting existing businesses to expand here.” 

Labrador continued, “Unfortunately, there is documented evidence that TRI has come at the expense of Idaho businesses that are also contributing to the state's economy in ways besides adding employeesthrough capital investment, higher employee wages or increases in benefits. That is why the TRI needs to be replaced with a tax policy that benefits all Idaho businesses, not just businesses that are adding employees. I know we can do better. We can and should have the lowest taxes in the region and perhaps even the nation. And we can also have a tax and regulatory environment that is attractive to new and existing businesses of all shapes and sizes.”

And now, the campaign for governor is getting interesting.

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