Details of the Local Option Tax Debate

Local Option Tax Generally

Opponents argue that local governments already have local option tools through which to address their transportation infrastructure needs.  Opponents point to the county optional vehicle registration fee—a mechanism through which counties may raise transportation funds by adding a local fee to the state’s vehicle registration fee—and local improvement districts—through which cities may assess property owners for the cost of local roads.

Proponents argue that additional local option taxing authority is a necessary supplement to these existing tools.  They also distinguish between local improvement districts and local option sales tax and registration fee authority.  Proponents point out that property taxes—those imposed by local improvement districts—are the least popular form of tax while sales tax, at least, is resented less.

House Bill 155

House Bill 155 was amended to set the voter approval for specific projects at two-thirds and was recently defeated on a narrow 31 to 39 vote.  Given that some voting against it said that they would prefer to see what happens with proposals for statewide transportation revenue first, this proposal could come back again. 

Units of Local Government Authorized to Levy the Tax 

Debate also exists regarding which entities of local government should be allowed to exercise local option sales tax authority.  Some argue that only counties should exercise this authority.  Others argue that local option taxing authority should be extended to cities and regional authorities such as Metropolitan Planning Organizations (MPOs).  MPOs are associations of counties, cities, and highway districts that coordinate transportation planning and development activities within a metropolitan area. To be eligible for federal transportation funding, MPOs must be established in urban areas with populations of more than 50,000. MPOs exist for the Coeur d’Alene, Lewiston, Boise-Nampa, Pocatello, and Idaho Falls areas. 

Proponents of MPO taxing authority argue that these regional entities should be able to levy local option taxes because in the areas where they exist, transportation issues are inherently regional in nature.  The federal government imposes regional organizations for the management of transportation infrastructure in these areas with good reason, they argue.  Those who argue for county authority only argue that citizens of one jurisdiction shouldn’t be able to force a tax on citizens of another jurisdiction.  For example, some have expressed particular concern that Ada County voters who might be more supportive of investing in public transit and other transportation initiatives might be able to force taxes on Canyon County voters even when Canyon County voters reject the measure.

Thresholds Required for Approval 

Debate also exists regarding what level of voter approval should be required to pass a local tax proposal.  The debate ranges from a simple majority approval (50% plus 1) to a two-thirds majority approval.  Proponents of lower thresholds argue that the higher a threshold above simple majority, the more it allows the minority to impose its will on the majority.  They also argue that in jurisdictions that have two-thirds thresholds local option taxes are almost never passed.  Requiring a two-thirds threshold, proponents argue, is just a way for opponents of local option tax to ensure that no local jurisdiction ever uses it. 

Those who support a two-thirds threshold respond with a version of minority rights to the argument that high thresholds impose minority rule.  Imposing a tax is an awesome power of government over individuals, they argue.  Government should not be able to impose this on individuals who do not wish to pay it unless there is a particularly strong consensus among voters that the tax is necessary and appropriate. 

One possibility would be to allow a regional local option sales tax but to require that it pass by a higher threshold over all but that it must also pass by a lower threshold in each county (e.g. two-thirds and 60% or 60% and 50% plus 1).

Constitutional Requirement 

Perhaps the most hotly debated dimension of the local option sales tax issue in Idaho has been the question of whether such an authority should be granted through a constitutional amendment or simply through statute.  In the House, there has been strong support for providing the authority through, and only through, a constitutional amendment.  In the Senate, there has been strong opposition to a constitutional requirement and support for granting it through statute.  Most local government officials would prefer no constitutional amendment, but they have split about whether they would be willing to accept it in order to gain local option taxing authority.  Last year the Governor took the position that it should only be granted through constitutional amendment, but his position has been less clear this year.

Proponents of a constitutional requirement argue that it is the most appropriate way to grant such fundamental new governmental authority.  Broad guiding parameters to guide the specifics of local option taxing policy, they argue, are appropriately placed in the constitution.   Proponents of the constitutional amendment, particularly in the House, have argued that those guiding parameters should be general election dates only, county authority only, and a two-thirds voter approval threshold.  A constitutional amendment requires two-thirds approval in the House and Senate and ratification by a simple majority of voters.  This more difficult process, proponents argue, ensures broad public support, allows voters themselves to weigh in, and ensures that the fundamental guiding principles cannot be easily changed in the future.

Opponents to a constitutional amendment argue that such an amendment is unnecessary and that passing an unnecessary constitutional amendment sets a bad precedent.  They argue that passing a constitutional amendment to guarantee broad public support is unnecessary because the exercise of local option taxing authority already requires voter approval.  Those who oppose the requirement of a constitutional amendment also argue that it’s misguided for the current legislature to think that its wisdom is superior to future legislatures.  Why should the current legislature’s wisdom be privileged over future legislatures’, they ask, particularly since future legislatures will have the benefit of understanding future circumstances better?  Why, opponents of the constitutional amendment further ask, is it better to lock broad principles of local option policy into the constitution before practice determines their soundness?