Rep. Donna Pence, D-Gooding, and Sen. Roy Lacey, D-Pocatello, are advocating a change in the Idaho tax code by calling for a new tax credit for Idaho farmers and ranchers who provide additional processing facilities within the state.
House Bill 51 would allow for a taxpayer to claim a tax credit 30 percent of “the amount invested by the taxpayer in qualified businesses during the taxable year.” The director of the Idaho Department of Commerce would certify whether or not a business qualifies for the tax credit. The director would also be responsible for ensuring compliance within the tax code for businesses to follow regarding the tax credit.
The tax credit would be targeted toward the agricultural sector in the state, according to Pence.
But, according to the Show-Me Institute, a market solutions think tank in Missouri, a tax credit is simply a form of “wealth redistribution” to special interests. It puts state government in the position of picking “winners and losers” in the market. The Show-Me report, authored by Christine Harbin, says those with lobbying powers sufficient to gain a tax credit are putting those unable to lobby for a special favor at a competitive disadvantage.
Pence, however, said the tax credit could be used to strengthen and enhance already successful economic niches. Specifically, she pointed to ag interests as a beneficiary of the credit, saying, “Let’s keep it here and put that value added, whether it’s a new factory or whether it’s a beef slaughter plant that we don’t have.”
She said, for example, that cattlemen are dealing with extra costs of having to ship cattle out of the state for slaughter. “It costs $20 a head to ship their cattle out of here.” She continued, “We could keep that money here in Idaho and have jobs too. It helps them and it helps the whole economy” not to have to ship cattle elsewhere if adequate state processing facilities resulted from the credit.
She said while agricultural is doing well right now in the state, that can change. “I don’t know how long we are going to do so well in agricultural. It’s kind of cyclical a lot of times.” She says the credit carries with it an important qualifier: “You don’t get it until you make money.”
Rep. Stephen Hartgen, R-Twin Falls, wonders where the tax credit proposal could lead. “It is a concern of mine as to who actually would use the bill and for what purpose. We already have extensive marketing and processing of agricultural products in the state, and to provide an additional tax credit to those entities to create jobs may be a good idea in theory, but I would want to see how it worked.”
Hartgen, who sits on the House Revenue and Taxation Committee, also said, “The bill as written would also apply to very small producers. People who go to farmers markets, for example, and set up a table and market some homegrown products. That was interesting, I didn’t really think it would cover that, but they (the sponsors) said that it would, so I think we need to know more. When it (HB 51) comes back for the content hearing, I think we will learn more about what the bill would actually do.”
Harbin, in her analysis of tax credits, says they often create a budget problem as well. When a state approves a tax credit, she said, “that credit comes at the expense of other activities. This is because the state has a budget, and a dollar spent on tax credits is a dollar the state must cut from another program.”