On a close 5-4 vote, the Senate Local Government and Taxation Committee approved a proposal backed by Gov. Butch Otter that would give Idahoans an added tax break for donating to Idaho public and private schools and state agencies that were once targeted to be gradually taken off state funding. The credit on state income taxes could bring in $10 million to the schools and agencies, but would reduce state tax revenues by $5 million.
The Senate committee has voted down other tax breaks, including ones for homeless shelters and airplane repairs, but Sen. Brent Hill, R-Rexburg, said this proposal is different. “There has to be a charitable intent,” he said. Hill said taxpayers making larger donations to get larger tax credits wouldn’t come out ahead under the proposed legislation.
Sen. Curt McKenzie, R-Nampa, said the higher tax credit would help the targeted agencies remain stable in lean budget times. “This is one way to continue the good functions that they have through charitable contributions,” he said. Republican Sens. Lee Heinrich of Cascade, Mike Jorgenson of Hayden, and Shirley McKague of Meridian joined Hill and McKenzie in support of the bill. Four senators opposed the plan: Republicans Joe Stegner of Lewiston and Tim Corder of Mountain Home and Democrats Elliot Werk of Boise and Diane Bilyeu of Pocatello. Hill told IdahoReporter.com after the meeting that he had expected a 5-4 vote for the past month, and that the full Senate will also vote in favor of the tax credit.
Stegner said he opposed the tax credit because it amounted to lawmakers choosing charities that would get special treatment in the tax code. “The Legislature has historically passed out favors to ours friends, and unfortunately, the bill before us falls into this category,” he said. Stegner also said that he’s hesitant to approve a tax break during the current economic downturn. “I cannot in good conscience ask for additional tax credits to the tune of $5 million in an upcoming year knowing the tight economic condition the state is in.”
“If we’re going to support these elements of state government, then we should have a tax system that does those things, rather than what is in essence a voluntary tax,” Werk said.
Taxpayers would get a tax credit of 50 percent of a charitable contribution, which could count for half of their total state income tax liability. The maximum credit would increase from $100 to $500 for individual taxpayers, and from $200 to $1,000 on jointly filed returns. The legislation would increase the tax credit fivefold on donations to public or private schools and universities, libraries, museums, the Idaho State Historical Society, and Idaho Public Television. It would also extend that higher credit to the Idaho Commission of Hispanic Affairs, the Idaho Commission for the Blind and Visually Impaired, the Idaho Council on Developmental Disabilities, the Idaho State Independent Living Council, and the Idaho Council for the Deaf and Hard of Hearing. In January, the governor recommended that state funding for those agencies be phased out.
Rep. Wendy Jaquet, D-Ketchum, proposed an amendment during the committee meeting to add funding for the adult cystic fibrosis program to the list of programs that could get a larger tax credit. Her plan failed. McKenzie said there might not be enough time left in the session to amend the legislation and get it approved by both the Idaho House and Senate. Lawmakers that set the budget didn’t provide clear funding for the cystic fibrosis program, though they wrote a letter saying it remains a priority.
The added tax credit wouldn’t go into effect until next January, so the hit to state tax revenues wouldn’t be seen until April 2012, when Idahoans file their income taxes. The higher tax credit would expire in five years. Read IdahoReporter.com’s first story on the tax credit here. The text of the legislation is available here.