The House State Affairs Committee has approved a measure to extend financial perks to private businesses that meet specific criteria with the expansion of their operations.
“Our world has changed significantly,” testified Jeff Sayer, director of the Idaho Department of Commerce, as he argued in favor of House Bill 546. “Companies are more sophisticated, states are more competitive with their incentives and we need to become more competitive as well.”
Known as the Tax Reimbursement Incentive program, the bill extends tax credits to certain businesses that expand their operations in ways that meet specific government criteria. Under the plan, the Idaho Economic Advisory Council would determine the location and the manner in which a business must expand in order to be eligible for the tax credits.
Noting that businesses would have to participate in a “very lengthy process” in order to apply and qualify for the incentives, Sayer told the committee that “this is too big to be entirely director driven, it is too big just for me to handle.” He then referred to the economic advisory council as “the oversight committee” to which the power would be delegated to determine who receives the perks.
“This is the first time that I’m aware of that the Legislature would be taking tax policy and turning it over to an unelected body,” said Wayne Hoffman, president of the Idaho Freedom Foundation (IFF), as he debated in opposition to the bill.
The economic advisory council consists of seven members chosen by the governor. According to its website, the purpose of the council is to advise both the governor and the commerce department about policies that might grow the economy.
“I look at this as a no-cost solution and so there is no fiscal note on this bill,” Sayer noted. “I was laughed at and I was asked to admit that there would be a cost. So we augmented it and listed the cost of implementing the program at $3 million, but I will tell you that the gains to our state will far outweigh that cost.”
“It appears that the implementation is going to cost $3 million, but I’d prefer that the language in the bill was written in such a way that it reflected the $7 million that we stand to make,” said Rep. Dell Raybould, R-Rexburg. Sayer told Raybould that he would agree to such a change in the bill’s language.
Hoffman, on the other hand, disputed the assumptions of the tax incentive plan. “If Idaho is looking to be competitive with other states, the formula is relatively simple—cut the tax burden. All these special incentives, perks and deals are not working because they do not work.”
From there Hoffman noted research from the nonprofit Tax Foundation that is critical of Idaho’s business tax climate and also cited several items of his own research.
“Recall, for example, the Corporate Headquarters Incentive Act, to provide income, property tax and sales tax relief for corporate headquarters,” Hoffman stated. “Born 2005, died 2008. Total usage zero. And then the Small Employer Tax Credit, also born 2005, extended to 2020, has done little, less than half a million dollars in annual usage. “
Sayer acknowledged that several previous business incentive programs enacted by state government have failed, but argued that his plan is different. “There are examples from the past two decades of programs that used old incentives models and did not work, but this plan strikes a very appropriate balance.”
Noting that his plan requires businesses to “produce” before they receive the tax perks, Sayer asserted that “if there is any doubt about this plan, I can tell you that it is working in other states.”
Rep. JoAn Wood, R-Rigby, stated “I felt a bit stung by Albertsons when I first came onto this committee when we gave all kinds of incentives to get them to keep their corporate headquarters in our state and then they left.”
Raising concerns about the decision-making power that the plan would grant to the economic advisory council, Rep. Stephen Hartgen, R-Twin Falls, asked Sayer how the council would be held accountable to the public. Sayer assured Hartgen that it would be subject to the state’s open meeting laws.
Alex LaBeau of the Idaho Association of Commerce and Industry testified in favor of the bill. “We are competing for businesses not just state to state, but globally as well.”
In the end, Rep. Lenore Barrett, R-Challis, was the only committee member to vote against the plan. “If you’re going to try and help the economy, cut the taxes for everybody. I can’t support this,” she stated.
Note: IdahoReporter.com is published by the Idaho Freedom Foundation.