Brad little speaks to ATI

Gov. Brad Little addresses about 400 people at the Associated Taxpayers of Idaho annual conference on Wednesday, Dec. 1, in Boise.

BOISE — Next week, Idaho businesses will receive notices of an unemployment insurance tax increase, but if Gov. Brad Little has his way, lawmakers will reverse that when they return to town in January for the legislative session.

Little told the Associated Taxpayers of Idaho on Wednesday that he’ll propose legislation to freeze the base tax rate for unemployment insurance for Idaho businesses for two years, in 2022 and 2023. “This will result in a tax savings of $64 million to Idaho businesses over the next two years,” he said.

Idaho Department of Labor Director Jani Revier said the idea is to avoid two years of formula-driven tax increases for businesses that would then be followed by a cut three years out. A two-year freeze in the rate will avoid those ups and downs, without compromising the solvency of the unemployment insurance fund, she said.

“If the Legislature agrees with the governor and passes the legislation, we would do a follow-up notice,” Revier said. “And we hope it could be done in the first part of the session, so we could notify businesses before they pay their quarterly taxes.”

Little unveiled the proposal in his luncheon keynote speech to the ATI’s annual conference, which traditionally serves as a run-up to the Idaho legislative session. The conference was attended by hundreds of people, including legislators, lobbyists, business people and local government representatives.

Little also promised that in January he will “reveal my plans on how to give back to the people of Idaho yet another record budget surplus,” including “additional tax relief and continued investments in the areas that impact our lives the most, schools, roads and clean water.”

Many attendees at the conference were focused on property tax relief, with widespread concern around the state about the impacts of HB 389, a package of property tax changes, local government budget caps, business tax breaks and a small increase in the homeowner’s exemption that lawmakers passed in the final days of the main part of this year’s session in May.

“Property taxes continue to be a priority,” Little told the group, “and I will work with the Legislature and organizations like ATI to find solutions to offer real and immediate property tax relief.”

House Majority Leader Mike Moyle, R-Star, author of HB 389, said after the governor’s remarks, “The governor has been visiting with me on the tax issues, and that’s good. We’re talking. That will help.”

Little told the Idaho Press, “He knew there were going to be some unintended consequences of that bill, and now we’re seeing ‘em on paper. To Mike’s credit, he says we’ll fix it.”

Asked about potential fixes, Moyle said, “There’s a lot of little things need adjustments there,” including provisions regarding the “circuit breaker” property tax break for needy seniors, which lawmakers this year placed new limits on; provisions regarding urban renewal agencies; and provisions local governments have found unwieldy requiring them to calculate a “preliminary” levy rate to apply to new construction.

House Speaker Scott Bedke, who gave the opening remarks at Tuesday’s conference, noted that he’s been traveling the state and talking with Idahoans; he’s currently running for lieutenant governor. “The topic that they consistently bring up more than any other one is that my property taxes are too high and you need to do something about it,” Bedke said.

Moyle agreed. “It’s the No. 1 issue, I guarantee you,” he said.

Little touted the big income tax cut lawmakers approved and he signed into law this year; along with major investments in transportation, broadband infrastructure and more; and the amassing of the “largest rainy-day fund balance in state history.” He also said education remains his priority, and said, “Teachers are seeing increased paychecks because we are fully funding and building out the career ladder.”

“It’s incredible that we were able to get so much done in the midst of all that’s happened in the world around us,” the governor said. “However, there’s still much to be done. Idaho is growing. Our state is changing. And we want to balance all those challenges and opportunities ahead of us.”

Growth – particularly in Idaho housing prices – was a recurring theme for speakers at the conference.

Idaho’s current median home price is $446,000, Zions Bank Chief Economist Robert Spendlove told the attendees, “much higher than the national average of $312,000.” Right now, Idaho is seeing 38.2% year-over-year growth in home prices, he said, “the highest we’ve ever seen.” The national rate is 19.2%.

“I know that this level of housing price appreciation is unsustainable,” Spendlove said. “It is, like, literally mathematically impossible for us to continue to have this level of housing price appreciation.”

During another presentation, Garrett Lofto, president and CEO of JR Simplot Co., said his company recently experienced a first. “About six months ago, we were recruiting for a very high-level position in our company, we were recruiting somebody from California,” he said. “They said, ‘You know what? Meridian, Idaho is too expensive for me to live. It’s better for me to stay in California.’ Now how many of us have ever heard that? We never have.”

His concerns were shared by the two other CEOs who joined him on the panel, Odette Bolano of Saint Alphonsus and Lisa Grow of Idaho Power.

Bolano said, “We are looking for partnerships. … We’ve never been in the housing industry, but we are looking to be in the housing industry at this point.”

Grow said Idaho Power has company-owned employee housing in some parts of the state.

During a later session specifically on property taxes, Alex LaBeau, president of the Idaho Association of Commerce & Industry, said, “I think that HB 389 has some complications. … It probably works pretty well for counties, but for cities, fast-growth cities, it probably is problematic, and I think the Legislature will have to think about how we deal with that.”

David Turnbull, a developer and CEO of Brighton Corp., noted that property tax issues vary around the state. In Ada County, he said, the $25,000 increase in the homeowner’s exemption, which had been capped since 2016, “probably got wiped away by three months in appreciation.”

Seth Grigg, executive director of the Idaho Association of Counties, said, “I think simplicity is important. I think there are a lot of constituents out there, homeowners and others, that after the last session, they’re anticipating property tax reduction, and as they’ve opened their tax bills, I’m sure that they’ve noticed there’s not property tax reduction right now. So whatever the Legislature chooses to do this next session, it has to be simple, you have to be able to explain it to your constituents, and they have to be able to understand it at the end of the day.”

LaBeau said he thought moves to further increase the homeowner’s exemption would be “a wrong-headed approach … but it’s a politically viable one.” IACI instead favors eliminating the personal property tax on business equipment, he said, which would provide savings for the state’s largest corporations.

Grigg said Idaho needs to examine everything it’s asking local governments to provide and how best to fund those services. “You can’t just cap budgets and create property tax relief, because of all the other market conditions,” he said. He called for considering providing state funding for some of the services local governments now must cover through property taxes, such as courts.

Little’s unemployment insurance tax proposal comes because the formula that determines the rates businesses pay is based on a 20-year window, looking back, to determine how much must be kept in the unemployment insurance trust fund to cover unemployment benefit payouts. That window now reaches back to calendar years 2001 and 2002, which were high-cost years due to a recession at the time. The rate freeze would knock out the influence of those two years until they’ve cycled out of the formula.

Then, Revier said, the formula would kick back in, to ensure the fund’s continued solvency.

The move would follow Little’s earlier move to boost the state’s unemployment insurance trust fund by depositing $200 million in federal CARES Act money into it.

“That resulted in a small tax decrease, but more than anything, it prevented what would’ve been a large increase last year,” Revier said. The new proposal, she said, “provides stability over the next three years.”

Little called it “kind of a no-brainer,” and said, “It’s just the right thing to do.”

Betsy Z. Russell is the Boise bureau chief and state capitol reporter for the Idaho Press and Adams Publishing Group. Follow her on Twitter at @BetsyZRussell.

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