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Report Encourages Idaho Lawmakers To Consider All Factors When Making Tax Policy Changes

Tax Credits / Flickr Creative Commons

Idaho lawmakers have a new tool available to guide them in making tax policy decisions.

The Legislature’s Office of Performance Evaluations presented a 38-page report to the Joint Legislative Oversight Committee this morning. The study, a Guide to Comparing Business Tax Policies, was requested by the 2012 Legislature.

The report focuses on a couple of main ideas; tax rates are not the only thing (or most important thing) businesses consider when looking to expand or relocate in Idaho, and tax rate changes aren’t directly related to business investment.

“Although businesses generally seek to maximize their after-tax rate of return, the link between tax costs and a favorable business environment is not direct. For example, businesses rely on tax-funded government services, such as infrastructure development, education, and workforce training. When these tax-funded government services and other nontax factors are weak, they often become more substantial barriers to achieving policymakers’ goals than unfavorable tax rates. Consequently, policymakers must balance the cost of lowering business taxes to incentivize investment while simultaneously adequately funding services that are also valued by businesses.” — Office of Performance Evaluation

The report encourages lawmakers to consider the same non-tax factors businesses take into account when shaping tax policy.

“The effects of tax rate and policy changes cannot be understood or predicted in isolation from nontax factors. Many interrelated factors determine whether a given state is an attractive place for businesses to invest. Economic performance and business investment hinge on the balance of many, often competing, tax and nontax factors.” – Office of Performance Evaluation

  • Availability of a trained workforce
  • Climate and amenities
  • Education
  • Infrastructure
  • Labor costs
  • Location-specific profits (before tax considerations
  • Market size
  • Proximity to waterways
  • Purchasing power (business cost of living)

The Office of Performance Evaluation also came up with an interactive tool that allows lawmakers to compare Idaho’s tax rates with other states, and understand what happens to revenue streams if tax rates are changed.

Over the last decade, Idaho lawmakers have approved several sweeping tax policy changes. In  the last two years, lawmakers cut the top tax rates for businesses and individuals, they approved new business tax exemptions, and this year legislators eliminated the business personal property tax for the vast majority of Idaho companies.

Lawmakers will likely consider more tax policy changes next year, as Gov. C.L. “Butch” Otter wants to oversee three-straight years of tax cuts.

Comments

  • JamesGatz

    I feel sorry for the people at the Idaho State Office of Performance Evaluations. Soon they will have to change the name of their operation to the “Office of Reports that the Legislature Asks for but then Ignores Because the Reports Don’t Say the Right Things.” Or perhaps the “Office of You Asked, We Answered, Now Do Something.”

    First a report about workplace conditions in K-12 education revealed a “strong undercurrent of despair” among Idaho teachers. This finding was dismissed by State Superintendent of Public Instruction Tom Luna as being largely anecdotal and therefore unproved, while Sen. John Goedde, chair of the Senate Education Committee, openly sneered at the report and its findings, declaring that “despair is
    contagious, as is enthusiasm – it’s a state of mind” and suggesting that teachers turn those frowns upside down through sheer force of will and happy thoughts.

    Second, the Office of Performance Evaluations was asked by the Joint Legislative Oversight Committee to determine whether charter schools have lived up to legislative intent and whether they add value to the system overall. The findings? Charter schools do not resemble today what they were intended to be, with little difference between them and traditional schools. And no one knows whether they add value because no one is particularly interested in finding out if they do. In response to these findings, the Oversight Committee pulled the plug on the investigation, while Tom Luna dismissed the report as “unscientific.”

    Remember the not-exactly-unusual findings of this latest report, particularly when Gov. Otter & Co. start yammering about tax breaks and reduced government spending being critical to enticing businesses to Idaho and to economic vitality.
    You’ll have to remember it, because if recent history is any guide, the findings and the report itself will be dismissed as “unscientific” and unworthy of further consideration.

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