I’m a big fan of small businesses. My parents owned and operated a small business for many years, installing heating, air conditioning and refrigeration systems. The work was menacingly hard. You’d get up early, and go to bed late at night after schlepping around heavy equipment and tools. Then you’d do it all over again. If a customer needed you after hours or on weekends, or when it was super hot or super cold, you went. You worked. There were no sick days. If you didn’t work, you didn’t get paid. Most small entrepreneurs can appreciate this.
Data from the U.S. Census Bureau show that of the 5.6 million businesses spread across states, 62 percent of them have fewer than five employees. The numbers are consistent with what you find in Idaho. Of the 35,690 businesses in our state, 87 percent have fewer than 20 employees. Only 7 percent of Idaho businesses have between 20 and 99 employees. A mere 3 percent have more than 500 employees.
That is why the news of yet two more special tax incentives for businesses planning to expand or relocate to Idaho is so aggravating.
- State officials announced that specialty frozen food maker Amy’s Kitchen will be moving to the closed H.J. Heinz plant in Pocatello. The company is expected to hire 200 people initially at more than $33,000 a year. To bring the company to Idaho, the state offered a tax incentive approved by the Legislature and the governor last winter, an incentive that allows the Department of Commerce to negotiate the company’s tax liability for up to 15 years. Amy’s Kitchen is getting a 26 percent break on its taxes. Bannock County added a lucrative 75 percent cut in the company’s property tax.
- Kochava, a high tech company in Sandpoint, is also getting a special break, the state has announced. It will get a 28 percent reduction in its taxes. The mobile software company plans to add up to 50 jobs in the next five years, nearly doubling its workforce.
Don’t bother trying to figure out why one company got a tax break of 28 percent and the other 26 percent. You’ll never be able to get a solid answer. The tax policy is as arbitrary as it looks. Skywest’s expansion in Boise netted a 30 percent break.
Northwest Nazarene University Professor Peter Crabb, a member of the Idaho Freedom Foundation’s board of scholars, told the Idaho Statesman that the state is “giving away the farm” and said economists largely agree that tax incentives don’t work.
Tax incentives are also unfair. The companies that compete against Amy’s Kitchen or Kochava, in many cases smaller employers, are stuck with a higher tax bill than their competition. They’re also paying Kochava and Amy’s taxes through higher marginal tax rates and higher property taxes. Furthermore, Idaho’s myopia regarding companies with capacity to add jobs is harmful to companies with other priorities.
The way this particular incentive is constructed, an employer who chooses to give big raises to its employees, invest in new product lines or equipment, or simply chooses to remain small and competitive, will always be viewed as inferior in the eyes of state policymakers, and treated accordingly.
It bothers me that people like my mom and dad, and like the many Idaho business owners I know who are simply trying to get ahead and stay ahead—people who ask nothing of the government and want nothing in return—are being forced to work harder in order to compete against and subsidize those that do. I hope it bothers you, too.