Local Option Taxes

By Senator Brent Hill

 

The Standard Journal’s editorial board commentary, Solution to funding roadwork lies in Boise, not in bonding (9/17/05), stated that it should be up to the state legislature to find the best mechanism to fund the needed street construction and maintenance in Rexburg. The article also recommended that the Legislature authorize cities, counties and school districts to consider local option taxes, such as a local sales tax on top of the general state sales tax.

 

Currently, under Idaho law, only a few specified areas are permitted to levy local option taxes. These include additional sales taxes in resort areas such as Sun Valley, Stanley and Driggs, an extra half-cent sales tax in Kootenai and Nez Perce counties for the funding of detention facilities, and a lodging tax on hotel rooms in “auditorium districts” to fund local convention centers. All of these local option taxes were approved by the affected voters and implemented as alternatives to raising property taxes.  

 

The question remains: In a state that generally advocates local control, why does Idaho prohibit other cities, counties and school districts from proposing local option taxes to their citizens? There are two main reasons:

 

First, the Idaho legislature is very protective of the authority to impose tax burdens on the people. There is a fear that some prodigal pockets of the state will overtax their people if allowed to assess local option taxes. What the legislature fails to recognize is that all local option taxes must be approved by the voters. Just as important is the fact that most local option taxes are instituted in lieu of additional property taxes, so the issue is not more taxes, but which type of taxes best fits the needs of the people.

 

Second, local citizens sometimes do not consider the adverse effects local sales taxes may have on retail businesses within the taxing district. A city sales tax might encourage customers to shop in neighboring towns, especially for high-ticket items such as jewelry, appliances and home furnishings. It is imperative for voters to be sensitive to this potential hazard.

 

Certainly local option sales taxes do not come without risks. City, county and school district officials need to work closely together to coordinate the allocation of local option taxes, rather than compete with one another for voter approval. Decisions to implement such taxes should be made responsibly and infrequently. But the current legislative position that local officials and citizens cannot make such responsible decisions is unwarranted. Local government officials are closest to understanding the needs of their individual communities and citizens. They are elected by those citizens to do a job and should be allowed to do it without excessive legislative interference. If they fall short, their electorate will hold them accountable.

 

The complex issues facing our various communities cannot be solved with a one-size-fit-all approach. The wisdom of our small legislative body is very limited in comparison to the understanding of more than 1,000 locally elected officials. As expressed by the political platform of the Idaho Republican Party: “We believe the most effective, responsible and responsive government is government closest to the people.”

 

There are a number of solutions that should be considered to relieve the property tax burden of Idaho citizens. Local option taxes should be one of those considerations.