Business tax repeal would impact budget

The proposed repeal of the personal property tax would impact many institutions in Bonner County. (Graphic by CAROLINE LOBSINGER)

SANDPOINT — Bonner County could have to grapple with a $1.2 million budget shortfall if state lawmakers eliminate a tax on business’ personal property, according to the Idaho State Tax Commission.

Idaho businesses have advocated for the elimination of the personal property tax because of the bureaucratic burden of calculating it. Proponents contend eliminating the tax would make Idaho businesses more competitive and draw more companies to the state.

But there is growing concern that elimination of the business tax would shift the burden onto landowners via increased property taxes or force taxing districts to cut services to make up for the shortfall.

A state tax commission analysis of every taxing district in the state — from counties and cities to fire and school districts — indicates that budgets could be significantly impacted.

Idaho counties received $39 million in personal property taxes in 2012, according to the commission’s analysis. School districts also received about $39 million and cities received approximately $33 million in 2012.

Bonner County received $1,189,403 in personal property tax revenue in 2012, which is 6.5 percent of the total property taxes collected.

“Percentage-wise, we’re not really that bad off, although it would still be a big hit,” said Bonner County Commission Chairman Cary Kelly.

Kelly said the commission is keeping a close eye on the issue and is hoping lawmakers will find a way to mitigate budget impacts to counties.

“Obviously, it’s going to affect next year’s budget quite a bit if it in fact does go through and if we have to make up that shortfall if it’s not offset or phased in over a number of years,” said Kelly.

Kelly said the county may accelerate its budget-setting process to account for the intended consequences of the tax’s elimination.

“It all sounds real good until you find out what the impact’s going to be,” he said. “If you told everybody, ‘Yeah, we’ll get rid of it but we’re increasing property taxes by 10 percent.’ They probably wouldn’t think it was all that great of an idea.”

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