Revamped sales tax plan passes Idaho House

BOISE — A plan to revamp the state sales tax revenue sharing formula sailed through the House on a near party-line vote Thursday.

The proposal, which would result in slower revenue growth for almost every city in north central Idaho, was approved 53-16.

Reps. Chad Christensen, R-Ammon, and Randy Armstrong, R-Inkom, were the only Republicans to oppose the bill. All 14 House Democrats voted against it.

There was no testimony in opposition to the bill during a House committee hearing last week.

The legislation is sponsored by Rep. Jason Monks, R-Nampa. It doesn’t change the overall percentage of gross sales tax collections that flow back to local governments; nor does it affect how much of the money goes to counties or to special taxing districts.

The distribution to cities, however, would shift to a system based primarily on population.

A city’s share of the distribution currently reflects a combination of population and property values, plus a historical carryover from the way property taxes were collected 50 years ago, when the sales tax was put in place.

As a result, Monks said, cities now receive wildly varying sales tax amounts, on a per-capita basis.

For example, an analysis from the legislative budget office indicated that Sun Valley received $528.88 per person in 2018. By comparison, Elk River, in Clearwater County, received $170.65. Lewiston, Cottonwood, Craigmont, Grangeville and Orofino all received in excess of $100 per person.

The per-capita statewide average in 2018 was $76.22. Moscow, at $65.49, was the only major city in the region to fall below that.

Monks is proposing that all Idaho cities be held “harmless,” in the sense that they would continue to receive at least as much sales tax revenue as they do now, so long as gross sales tax collections continue to increase.

If gross tax collections increase from one year to the next, the first 1 percent would be distributed to all cities, in proportion to their population. Anything above the 1 percent, however, would only go to cities that are below the statewide average, also in proportion to their population.

Based on the new formula, cities above the statewide average would see slower revenue growth in the future than they would under the current system.

Had Monks’ plan been in place in 2019, for example, Lewiston would have received $76,587 less, a 2 percent decrease, than it actually received. Similarly, Orofino would have seen a 1.7 percent, $5,780 decrease.

Moscow would have collected an additional $149,304, or 8.6 percent.

Monks, however, encouraged lawmakers to vote on the merits of the bill, rather than on the effect it might have for their individual communities.

“Ask yourselves if this is a fair solution,” he said. “If you don’t think it’s fair, vote no; I’m fine with that. But I think it’s a fair solution. It doesn’t take anything away from anybody. A reduction in (revenue growth) isn’t the same as a cut. Vote with your hearts, not with your city.”

The measure now moves on to the Senate for further action.

Spence may be contacted at bspence@lmtribune.com or (208) 791-9168.