HB 375 - Railroad tax credit

HB 375 - Railroad tax credit

by
Phil Haunschild
January 22, 2018
Phil Haunschild
January 22, 2018

Bill description: HB 375 would establish a new corporate welfare program for small railroad companies investing in their infrastructure.

Rating: -2

Does it increase government redistribution of wealth? Examples include the use of tax policy or other incentives to reward specific interest groups, businesses, politicians, or government employees with special favors or perks; transfer payments; and hiring additional government employees. Conversely, does it decrease government redistribution of wealth?

HB 375 would give well-connected railroad companies special perks under the law. The new program created through this legislation would give Class II and Class III railroads, which have total carrier operating revenues less than $450 million, a substantial tax break. The program would sunset five years after implementation. Conspicuously, this bill leaves out the few Class I rail carriers such as Union Pacific and BNSF Railway, which also have track in Idaho.

The smaller rail companies operating in Idaho would receive a tax credit worth 50 percent of the investments they make into any new rail infrastructure. The credit would be capped at $3,500 for each mile of track that is developed. In addition, these companies could deduct these investments as general business expenses. Allowing these companies to take both the credit and the deduction would allow them to lower their total tax liability twice for the same expenses.

HB 375 would also allow these companies to transfer these tax credits to other Idaho taxpayers if the railroad company does not need the full amount to offset their own tax liabilities in Idaho. This would allow them to set up a secondary market for the tax credit, which could even further increase the face value of the credit to these railroad companies. If they can exchange the tax credit for a lower price on materials or other inputs for their projects it could increase the total savings to these few companies.

HB 375 benefits slightly more than a dozen companies at the expense of other taxpayers (one company alone operates more than half of the eligible track in Idaho). Based on the 855 miles of track that qualify, these few companies could receive a total of roughly $3 million in tax breaks in just the first year of this program’s implementation. However, as more new track is laid throughout the five-year program, this amount could increase every year.

(-1)

Does it violate the principle of equal protection under the law? Conversely, does it restore or protect the principle of equal protection under the law?

This legislation benefits a few companies at the expense of others. When such policies are implemented they distort the marketplace, undermine public trust in elected officials, and create an unfair playing field for businesses operating in Idaho.

(-1)

Update: This analysis was updated January 31 to provide more information.

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