Does the future hold lower and broader sales taxes in Idaho and Pennsylvania?
Although Idaho voters won’t choose a new governor until November 6, 2018, gubernatorial hopefuls are already on the stump. Tax changes are top of mind for many candidates.
If elected, state Rep. Raúl Labrador has a plan to reduce the state’s 6 percent sales tax to 5 percent, as well as repeal the tax on groceries. He also has a goal to broaden sales tax, which he would achieve by eliminating many exemptions.
Although he has yet to release details, Labrador says his proposed changes would “get rid of some of the loopholes that are in the tax code so we can have a fair and broader tax.” This, he says, would “make us competitive with all of our neighbors.” It would also “unleash Idaho’s full economic potential.”
Talk of eliminating sales tax exemptions isn’t new. In 2003, a legislative committee produced a comprehensive report of the state’s sales tax breaks, “which at the time totaled more than $1 billion and exceeded the entire amount the sales tax collected.” Nothing came of it. In 2007, another push to reduce exemptions achieved little real reform.
Two other gubernatorial candidates are calling for more limited sales tax reform. Both Tommy Ahlquist and Lt. Gov. Brad Little would remove the state’s 6 percent sales tax from groceries. Earlier this year, Gov. Butch Otter vetoed a bill that provided a sales tax exemption for food sold for human consumption.
As promised last July, Pennsylvania state Rep. Russ Diamond has introduced a series of bills that seek to slash state and local sales tax rates, remove all sales and use tax exceptions and exemptions, and ensure revenue neutrality. His goal, he says, is to “put an end to the sales tax jigsaw puzzle that pits Pennsylvanian against Pennsylvanian and adopt instead a modernized level playing field which acknowledges the realities of our economy and the fact that we’re all in this together.”
HB 1905 is perhaps the most wide-sweeping legislation. It would:
- Eliminate all sales and use tax exceptions and exemptions
- Reduce the state sales tax rate from 6 to 1.9 percent
- Reduce the transfer rate of sales tax revenue that funds public transit (Public Transportation Assistance Fund, or PTAF) from 0.947 to 0.3 percent.
The last change would help ensure revenue neutrality.
HB 1906 would drop the Allegheny County sales and use tax from 1 to 0.32 percent. Allegheny County is home to Pittsburgh and is the state’s second most populated county. Philadelphia County has the largest population.
HB 1907 would reduce to 0.32 percent the rate of additional tax certain cities can impose on retail sales and sales of vehicles, aircraft, and motorcraft (down from 0.5 percent and 1 percent respectively). According ot the bill, the tax rate on utility services “may be imposed” at the rate of1 percent. See the Pennsylvania Intergovernmental Cooperation Authority Act for Cities of the First Class for additional information.
Finally, HB 1908 seeks to reduce deposits to the Public Transportation Trust Fund (PTTF) from 4.4 to 1.42 percent annually.
In a memorandum submitted July 7, 2017, Rep. Diamond said he would also seek to reduce Philadelphia local sales and use tax from 2 to 0.64 percent.
Gov. Tom Wolf has repeatedly called for a broader sales tax, although he’s also tried to raise the sales tax rate. His efforts have largely been resisted. However, his administration did expand sales tax to digital downloads in August 2016.