Bill Description: House Bill 671 would raise the cap on a sales tax rebate incentive program for developers who fund highway improvements.
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NOTE: House Bill 671 is similar to House Bill 506 (2026). Both bills would increase the refund cap from $35 million to $100 million, but House Bill 506 would raise the minimum cost of a qualifying transportation project from $6 million to $10 million, while House Bill 671 would reduce it to $5 million.
Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?
Idaho’s State Taxation Anticipated Revenue program, or STARs, rebates 60% of the sales and use taxes collected and remitted by qualified retailers (primarily new ones) within a large retail complex back to the developer. This reimburses the developer for the costs it incurs for major government-approved transportation improvements, such as new highway interchanges or significant highway upgrades.
To qualify, developers must spend at least $4 million on the retail complex construction and $6 million on the qualifying public highway project. (This is done via a formal agreement with the Idaho Transportation Board and/or local entities.) Rebates are capped at the project’s certified improvement costs or $35 million, whichever is less. Payments come from a dedicated state treasury fund, which is funded by diverting that 60% portion of incoming sales taxes from the site, with no interest paid, and rebates stopping once the cap is reached.
The program functions very much like a privately fronted, sales-tax-based version of tax-increment financing, or TIF. (Urban renewal districts use a property-tax-based version of TIF as well.) It allows highway districts and local governments to spend unappropriated dollars on highway projects by using private funds upfront while leveraging future tax collections. It’s not a direct form of debt like bonding, but it still obligates future tax revenue to fund today’s spending.
House Bill 671 would amend Section 63-3641, Idaho Code, to increase the STARs program refund cap from $35 million to $100 million and decrease the minimum cost of a qualifying transportation project from $6 million to $5 million.
While the STARs program is regarded as economic development, it can also be viewed as government manipulation of the market because it allows up to $100 million in future tax revenue to be dedicated to paying for a transportation project that would not have taken place (at least at the time) but for the needs of a large retail development.
While advocates suggest that the program pays for itself because the rebates come from new developments from which the State has not previously been collecting sales taxes, this argument presumes that without the STARs program, such developments wouldn’t happen at all. But that’s the “knowledge problem” that always plagues central planners. Because a proposed development might happen anyway (even if the developer wasn’t reimbursed for required transportation infrastructure upgrades), and if it did, there would be (up to) an extra $100 million in tax revenue that could be used to reduce debt or provide for new tax cuts.
Instead of attempting to engineer certain outcomes by providing tax-funded incentives to developers, the state should take a hands-off approach and allow development and growth to occur in a purely market-driven environment.
House Bill 671 expansion of the STARs program won’t necessarily result in it being used for more or larger developments, but it does create that possibility.
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