Members of the House Revenue and Taxation Committee voted 12 to 3 Monday to introduce a new tax policy bill and send it straight to the House floor -- without a public hearing.
The measure, sponsored by House Majority Leader Mike Moyle, R-Star, would reduce income taxes for all Idaho workers by one-tenth of a percent. In real terms, this would allow Idahoans next year to collectively keep more than $27 million of their earnings.
The bill also includes a provision to expand Idaho’s ability to collect taxes for online purchases, which would drive up tax collections by an estimated $11 million.
Legislators opted to skip a public hearing for the measure, and sent the bill straight to the floor for a vote, which will likely come in the next day or two.
Moyle’s legislation combines two bills lawmakers have already heard this year, which they did not approve. One of those bills, advanced by the majority leader, would have similarly cut income taxes for top earners -- anyone making about $7,200 a year or more -- by one-tenth of a percent; that same bill would have also increased Idaho’s grocery-tax rebate by $10 for low-income earners.
That bill failed last week in the Senate Local Government and Taxation Committee.
Rep. Lance Clow, R-Twin Falls, and Sen. Jeff Siddoway, R-Terreton, sponsored the second bill, which would have expanded Idaho’s ability to collect sales taxes on Internet purchases.
Idaho code already allows the state to collect taxes on some Internet purchases. Companies with a clear nexus in the state, generally considered a physical place of business, as defined by the U.S. Supreme Court’s 1992 Quill decision, must collect Idaho’s 6 percent sales tax and remit it to the Idaho State Tax Commission.
Companies without a clearly defined nexus, which includes online retailers such as Amazon.com, don’t have to collect or remit sales taxes.
The original Clow-Siddoway bill would have expanded the definition of nexus to include companies with in-state distribution facilities or companies that conduct marketing, fulfillment or certain other activities in Idaho.
If online retailers don’t collect sales taxes on purchases, the state’s use tax requires Idahoans to remit the taxes to the state themselves via their annual income tax filings. State officials believe Idahoans report and pay a small fraction of what Idaho law says they owe.
During Monday’s lengthy Revenue and Taxation Committee hearing, lawmakers tried to flesh out exactly which businesses would be forced to remit taxes. Moyle said the issue is complicated, but the bill would give the Idaho State Tax Commission authority to write very explicit regulations and guidelines for online retailers.
Rep. Ron Nate, R-Rexburg, suggested the bill would create a confusing business environment, and would be tough to enforce.
“It sounds like big government, boondoggle, a mess of a tax system to try and enforce taxes all across the country for companies that are selling once, twice or 50 times,” Nate remarked.
“The tax is due,” Moyle quickly shot back. “I think the state of Idaho is smart enough we can figure out how to figure that out and make it work.”
When asked by Rep. Heather Scott, R-Blanchard, why the Legislature is taking up such a complex issue with only a few days left in the session, Moyle said lawmakers negotiated to find a “sweet spot” where everyone could agree on tax policy.
During closing discussion, Nate warned the bill’s complexity would confuse Idahoans even further about what taxes they owe on Internet purchases.
“It’s going to be impossible to tell when I owe it and when I don’t to try to be fair in my tax payments,” Nate stated.
Rep. Stephen Hartgen, R-Twin Falls, said the bill is “fraught with problems” that legislators will likely have to clean up next year.
Rep. Greg Chaney, R-Caldwell, supported the measure as a way to find new funding for government schools. “I think this is good policy,” he said.
Nate and Scott, along with Rep. Mark Nye, D-Pocatello, opposed the measure.