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Tax relief proposal will likely include a tax shift

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Posted: Thursday, February 14, 2013 10:29 am

Draft legislation to eliminate the business personal property tax may be ready for release in the next few days.

The final details are still being negotiated, but the bill would likely phase out the $141 million tax over six or seven years. Local taxing jurisdictions – including cities, counties and school districts – would be reimbursed for most of that revenue, but some of the burden could be shifted to real property owners.

Sen. Jeff Siddoway, chairman of the Senate Local Government and Taxation Committee, said a small group of lawmakers and stakeholder groups have been meeting with the governor's staff several times each week.

They thought they had a draft bill ready to release Tuesday, he said, but there continues to be disagreement about whether operating property should be included in the proposal.

Most operating property is owned by electrical utilities – which are typically regulated and get a guaranteed rate of return – but telecommunications firms also have some.

They really do go out and compete for business, so we're having a tough time reconciling that,” Siddoway said.

Although the governor has indicated he will only support personal property tax relief if it does no harm to local jurisdictions, that doesn't necessarily mean local taxpayers won't be affected.

Most of us on the committee realize the local districts are going to have to participate in some of the reductions, but hopefully their participation won't cause any undue hardship,” Siddoway.

For example, local districts may be asked to reduce their personal property tax collections by 0.5 percent per year for six years, or a total of 3 percent. That could be shifted to real property taxpayers, or the districts could cover the cost through budget cuts or efficiencies.

If their growth rate mirrors the state's, Siddoway said, then this proposal would ask local districts to accept maybe a 2.5 percent increase in annual revenues, rather than a 3 percent increase.

Once the draft bill is ready for release, he fully expects it to be modified.

I anticipate that the bill that first comes out won't be the bill that ultimately gets out,” Siddoway said. “We want to make sure we get this right.”

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