Otter uses Lego's analogy for potential tax cuts

by Dave Goins Idaho News Service

The Aberdeen Times of Aberdeen, Idaho

To use an unlikely and at least slightly twisted metaphor, Idaho Republican Gov. C.L. "Butch" Otter toyed with the Idaho Legislature Jan. 9, asking state lawmakers to construct a $45 million package of election-year tax cuts to their liking.

Really, though, while Otter's recommendation in that area may have much more resembled demolition than construction to some observers, the governor's suggestion to legislators to figuratively begin playing with $45 million in potential tax cuts actually began three days before that

-at a private Friday afternoon (Jan. 6) meeting that included Otter, gubernatorial staff, and legislative leaders in the governor's office suite conference room, according to House Assistant Majority Leader Scott Bedke, R-Oakley.

"Let's use this analogy: he (Otter) gave us a box of Legos and every box had the same number of Legos, the same dimensions of Legos, the same sizes, the same colors, and, basically said, 'Here, go see what you can put together,'" Bedke said during a Jan. 12 afternoon interview, holding a green sheet with four main tax slicing potential areas-personal property tax, individual income tax, corporate income tax, tax credits-roughly outlined by the governor.

So, the recommended tax cuts announced by the governor Monday (Jan. 9) were no surprise to Bedke, who continued to paraphrase the essence of Otter's Jan. 6 preview words to legislative leadership.

" 'Go, expose this score sheet to the legislative process and come back. Keep me in the loop. We'd like to move the needle on Project 60 (an ongoing economic initiative). But let's not argue about how much it costs to move from 7.6 (percent) to ... 7.4 in the corporate income tax. Let's not argue about moving the brackets in the individual income tax from one to the other. Let's just, here's our best numbers. . .Let's just all use this as the building blocks for whatever ideas come.' And, so, that's what we're doing right now."

Instead of jumping immediately at the chance to play with the tax cuts, Bedke-a member of the' powerful House Revenue and Taxation Committee

-indicated that he asked during the meeting for a political form of parental guidance, or specific direction from the governor and staff.

Were any specific directives given?

"No, he (Otter) was really careful not to do that," Bedke said. "Because, I asked. I said, 'What do you guys want to do?'"

Otter, the state chief executive who has a sign reading "THIS IS COWBOYUP COUNTRY" on the wall of his private, working office, had ironically pretty much handed the reigns of leadership on tax cuts over to the legislative branch.

That apparent flexibility in the tax cut arena by the governor apparently was mirrored in his Monday speech to the entire Legislature.

"I have been discussing the form of tax relief for some time now, with legislative leadership, business groups, tax experts and our citizens," Otter said during the afternoon speech on the first day of the 2012 legislative session. "There remains a wide diversity of opinion on how best to target tax relief. There are plenty of ideas, and just as many ways to crunch the numbers."

Otter's apparent flexibility on tax cuts flew in the face of my general perception that the governor usually is much more inclined to give lawmakers detailed instructions.

"Well, I don't know why he wasn't more prescriptive," Bedke said. "But, I mean, there's a separation of powers. I mean, he's a former legislator and I suspect that Butch Otter was one legislator that didn't like to be prescribed to by the governor's office. And, I kind of think he remembers those days. So, I think he was hesitant to say ... to put his ideas, to say, 'This is what I'd like to do, and I'd really like you guys to accomplish that.'"

Bedke added: "So, he just didn't do that, for whatever reasons."

While Otter's rationale on that may remain cloudy and cryptic to some, it seems as clear as a sunny day on Idaho high desert rangeland that draft legislation from the Idaho Association of Commerce and Industry-to somehow modify the $129.2 million in annual personal property taxes paid by Idaho businesses-will appear for lawmakers to consider at some juncture.

At a Jan. 5 meeting of the state's Economic Outlook and Revenue Assessment Committee, IACI President Alex LaBeau said the organization wants a revised Idaho tax policy that would eliminate the personal property tax "on tools, equipment, and machinery," a levy which he asserts is not only a burden on existing Idaho businesses, but is a deterrent to companies looking to locate operations in the Gem State.

"It is a factor that businesses consider and we can ignore it no longer," LaBeau said.

Compromise personal property tax legislation passed late in the 2008 session of the Idaho Legislature could have cut the tax by $17.4 million annually (with a per business exemption on business property up to $100,000 in value) in the event that state revenue growth reached 5 percent. That revenue growth rate hasn't occurred in the dark economic climate caused by the Great Recession.

Bedke said he has heard that IACI has draft legislation on the business property tax, although he hasn't yet read a copy. A Friday afternoon (Jan. 13) telephone call I made to LaBeau wasn't returned that day.

At any rate, after several years of hefty budget cuts during the recession, Otter appeared to be continuing to try to downsize state government, even though a projected surplus-contrasted with the deficits of recent years-of $130.3 million for state fiscal year 2013 (starting July 1 of this year), currently exists on paper at the Legislative Budget Office. To note, the executive branch's Division of Financial Management estimates "carryover" revenue, commonly known as surplus, for state fiscal year 2012 (ending June 30) at $103.5 million.

A lawmaker from northern Idaho said the downsizing of state government programs should continue, a contrast to the viewpoint in some circles that the vast majority of efforts should now be to restore program funding largely to the K-12 public schools and Medicaid.

"I think the (overall) budget cuts should stay in place," said Rep. R.J. "Dick" Harwood, R-St. Maries, another member of the House Revenue and Taxation Committee. "By reducing taxes and reducing regulations, it will create more economic stability out there and that, in turn, will bring back more taxes to the state."

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