There are 1.7 billion reasons why Idaho should be taking a critical look at its sales tax exemptions, writes Chuck Malloy.
By Chuck Malloy
The popular notion is that public schools, which receive just over $1.3 billion, is the largest item in the state’s budget.
But there’s one other item that eats up $1.7 billion, and it does nothing to help schools, roads and state services. That’s the amount it takes to maintain 80 or so sales tax exemptions, many of which have been in place since the sales tax was implemented almost 50 years ago.
It’s the elephant in the room politicians don’t want to talk about. Several lawmakers have tried to tackle the issue over the years and all have failed. Sales tax exemptions should be an issue in this year’s election campaign, but it’s more likely that they won’t in the interest of political self-preservation.
Imagine what could be done with another $1.7 billion. Idaho could double what it spends for the public schools and have money left over. It could be enough to take Idaho out the race for the bottom in just about every funding category for education. Maybe some of that money could be used to take our universities off the road to mediocrity. Or maybe the quality of lives of Idahoans could be better with improved roads and social services.
Of course, the odds of winning the lottery probably are better than eliminating the sales tax exemptions. There is a strong constituency for every one of those exemptions. And there are lobbyists lined up to protect all of them. It would be easier to push for increases in the income and sales taxes than ending the exemptions.
Eliminating exemptions would be tax increase on the business world and business operators don’t like higher taxes any more than Republican legislators. Given the choice between improving state services and company profits, business operators will favor the bottom line. That doesn’t make business operators bad guys. In some cases, a sales tax exemption could make the difference between a business surviving or going under.
But the fact is Idaho needs revenue - especially in education - and the state cannot expect to grow its way into prosperity. Idaho’s $1.3 billion budget for public schools is not enough. Every year, swarms of school districts pass supplemental levies to help compensate for what the state does not give to schools. Those levy increases are tax increases.
The Legislature doesn’t have the expertise, or the will, to objectively evaluate the exemptions. But there is plenty of expertise within the State Tax Commission. Two of its members, Ken Roberts and David Langhorst, are former legislative leaders; Roberts is a Republican and Langhorst a Democrat. But neither is pushing for the assignment, and they can’t do it on their own. Their job is to enforce tax policy, not make it. The commissioners would need a directive from the governor or the Legislature and more resources.
Offhand, I can think of 1.7 billion reasons why putting this issue in the hands of the commissioners would be a good investment for Idaho.