For the week of January 22 - 28, 2003

Quick and dirty tax no fix for state budget

 

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A "temporary" sales tax increase is the quick and dirty fix Idaho Gov. Dirk Kempthorne is pushing for the state’s battered budget.

The governor wants the Legislature to increase the state sales tax from 5 percent to 6.5 percent, or one and a half cents, for three years.

At the state level, temporary sales taxes are the chewing gum, string, rubber bands and paper clips of quick and dirty political solutions. The taxes are easily accessible and handy in an emergency. They can clog leaks, repair moving parts or mend tears.

It’s no wonder the governor is turning to the sales tax. The Legislature could open the sales tax spigot almost immediately. It would take more than a year to get income tax increases flowing.

Even so, a sales tax increase is the worst kind of fix.

The sales tax is regressive. That means rich and poor pay the same. That would be fine if the tax was on yachts or mansions—items unattainable by the poor. But Idaho levies the sales tax on food, one of the basic elements of life.

The state offers a rebate of the tax only if income tax statements are filed, but few people take advantage of it. Families so poor that they pay no income taxes at all end up paying sales taxes.

The sales tax is sneaky. Only the most organized people—we don’t know any, but there surely must be a few compulsive receipt collectors out there—know how much they pay in sales taxes each year.

Most of us have no idea how much we pay. On the other hand, every taxpayer knows exactly how much he or she is paying in income taxes and has the paperwork to prove it.

It’s this very lack of knowledge that is appealing to elected officials. Voters who have no big lump sums rattling around in their brains when they go to the polls are less likely to object to sales taxes or to the candidates who advocate them.

Temporary sales taxes are the sneakiest.

The one and a half cent increase proposed by the governor would generate $267 million--more than enough money to erase the $160 million deficit projected in 2003-2004. It would replenish the state’s rainy day fund, pay for construction of new buildings for colleges, and increase funding for higher education.

Guess what is likely to happen when the sales tax expires in three years? The budget will gap again.

Optimists say the state’s economy will grow out of the recession and income taxes will easily fill the new gap. Talk about irrational exuberance. The last decade taught most Americans the economy is never a sure thing.

The Legislature ought to forget the quick and dirty fix, get to work and craft a fair tax strategy. Simply increasing the sales tax isn’t it.

 

The Idaho Mountain Express is distributed free to residents and guests throughout the Sun Valley, Idaho resort area community. Subscribers to the Idaho Mountain Express will read these stories and others in this week's issue.