Wednesday, July 25, 2012

Do no harm

Local voters soon may find themselves faced with the question of whether to increase the resort cities' local-option sales tax in Sun Valley, Ketchum and Hailey and to devote that money to subsidizing commercial air service to the area.

An opinion issued by the office of the Idaho Attorney General in March, but only recently revealed to the public, opened a door that other legal minds had believed was not only locked, but bolted by a provision in the Idaho Constitution that prohibits counties, cities and school districts from lending its credit to any individual, association or corporation.

With the opinion in hand, the economic development group Fly Sun Valley Alliance asked the area's three resort cities to ask voters to temporarily increase the local sales tax by 1 percent to fund the subsidies. Whether the idea will take wing is anyone's guess, but elected officials and voters should weigh the current condition of businesses against the impacts of the tax as they decide what to do.

Will the tax-financed air subsidies make local businesses more or less competitive? Cheaper plane tickets are likely to attract more visitors to the valley or at least ensure continued commercial air service. However, an additional 1 percent tax, particularly on retail sales, could make it harder for local retailers because of competition from Internet-based businesses that pay no sales taxes whatsoever.

It's a sorry, unfair and anti-competitive situation that the Idaho Legislature has done absolutely nothing to remedy even though collecting sales taxes on Internet sales would create a level playing field for businesses and help the state's shrinking coffers at the same time.

Sun Valley and Ketchum levy a 2 percent tax on lodging and liquor by the drink. Sun Valley levies 2 percent on retail sales, while Ketchum levies 1 percent. Hailey levies 3 percent on rental vehicles and lodging, 2 percent on liquor by the drink and 1 percent on restaurant food. Idaho sales tax is an additional 6 percent.

Every retail shop owner in those cities has a story about the Internet. Typical are ski and board shop owners who educate people on equipment only to see them return to their shops to have bindings mounted on skis or boards that they've bought over the Internet to avoid paying sales taxes of up to 8 percent, a significant amount on large purchases.

Lodging proprietors also regularly relate stories of losing group business because of higher prices created by the taxes.

Determining whether the higher tax will help or hurt is part of the reason any proposal placed before voters may have a sunset provision. The cities' leaders should proceed with caution and try to figure out not only how to bolster the local economy, but how to do no harm in the process.

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