BOISE, Idaho (AP) -- A plan backed by Idaho's counties to cut just a slice of the state's business personal property tax is unfair and unconstitutional because it picks winners and losers, an industry representative told a House panel Tuesday.
The counties would have lawmakers repeal Idaho's personal property tax for virtually all small- and medium-sized businesses. The counties' plan would have the state tap into its general fund to replace $20 million in revenue that local governments stand to lose.
A competing plan put forward by the Idaho Association of Commerce and Industry would nearly eliminate the levy, cutting $120 million in personal property taxes in phases through 2020.
The House Revenue and Taxation Committee hearing reviewed the proposals at a hearing which attracted 200 people to the Capitol.
The county plan excludes state-assessed operating properties like telecommunications giant Century Link Inc. or the Union Pacific railroad from benefits, while still giving a break to locally-assessed competitors like Cable One, which offers phone service, and J.R. Simplot Co., which owns rail cars. Rick Smith, a Boise attorney who represents many large companies, said the proposal it wasn't just unfair, it's illegal.
"Idaho is going to get sued," Smith warned.
The Idaho attorney general's office, however, has concluded it wouldn't violate the Idaho Constitution's provisions on fair taxation.
The tax committee chairman, Rep. Gary Collins, R-Nampa, delayed a vote until Thursday.
House Majority Leader Mike Moyle, R-Star, recalled the 2001 session when the Legislature eliminated the personal property tax on agricultural equipment. "When we did that, there was an agreement that we would try to take care of that problem for everybody else," Moyle said.
There are stark differences between the proposals.
According to industry's proposal, the century-old tax that now totals $141 million in annual assessments on computers and chairs as well as semiconductor machinery and pipelines would be eliminated over seven years. Companies like Century Link and Union Pacific would see relief, while regulated utilities like Idaho Power Co. get a break only on future additions to their systems.
Though Gov. C.L. "Butch" Otter favors that proposal, his spokesman, Jon Hanian, said the Republican chief executive is staying largely out of the fray as discussion of the issue escalates in the last weeks of the 2013 session.
Counties, meanwhile, aim to exempt just the first $100,000 in businesses' personal property, in each county. Equipment less than $1,500 would be exempt, while record-keeping would be streamlined.
The counties had clearly mobilized: Of those gathered, a majority were representatives of school districts, cities and other taxing districts that favor the county's plan. Cities said companies come to Idaho for services offered by local communities, not tax policy.
"I have yet to have a discussion with a company about not coming to Idaho for the reason of not paying the personal property tax," said Pocatello Mayor Brian Blad.
Education officials argued the industry-backed proposal would hurt Idaho's 115 school districts because the burden of paying for future levies that many rely on to cover operations would shift to homeowners, undermining voters' support.
And the Idaho Public Employees Association contends tax cuts, including last year's $35 million income tax relief, hadn't fulfilled accompanying promises of economic growth, even as big companies reaped the benefits.
Meanwhile, Idaho chambers of commerce lined up behind industry's proposal, arguing their small members recognize the broader economic benefits of relief for big companies, too. Idaho Department of Commerce director Jeff Sayer, an Otter appointee, also urged full repeal.
"We need to keep a level playing field for all companies," he said.