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Otter Vetoes Grocery Tax Repeal—Legislators Threaten Lawsuit

Posted By Justin Ruen, Wednesday, April 12, 2017

The fate of one of the most important bills of the 2017 legislative session was sealed Tuesday night as Governor Otter vetoed the grocery tax repeal bill, House Bill 67.  You can read the Governor’s message outlining the reasons behind his veto of the bill by clicking the "Download File" link at the bottom of this blog post.

This morning, Rep. Bryan Zollinger, R-Idaho Falls; Rep. Ron Nate, R-Rexburg; and former congressional candidate Bryan Smith announced they would ask Secretary of State Lawerence Denney not to recognize the Governor’s veto because it allegedly violates the timeframe required by the Idaho Constitution.

Otter’s veto message articulates the importance of the grocery tax as a stable source of revenue during economic downturns and the dangers of relying on more economically volatile revenue sources to support education and other state general fund programs.

“Every Idaho citizen should know by now that I support tax relief.  In fact, I have approved about $1 billion in tax relief since I took office in 2007.  However, the costs of this particular proposal are too high and the potential for imminent financial need too great for the small amount of tax relief it would provide.”

“In a meeting with Republican leaders of the Idaho House and Senate during the recently concluded legislative session, the discussion turned to the desire by members of their respective caucuses to remove the 6 percent sales tax from groceries.  The leaders were concerned about the fiscal impacts of such a change, citing the trouble that Utah legislative leaders reported as a result of our neighboring state taking that action.”

“The advice from Utah was simple and straightforward: Don’t do it.  The ramifications of lifting the sales tax from food had made budgeting much more difficult with the loss of what indisputably was their most stable and consistent source of revenue for essential government operations.  Taxpayers benefited almost imperceptibly while lawmakers found themselves dealing with the peaks and valleys of income tax and other financial supports that are far more susceptible to economic fluctuations.”

“The income derived from a tax on groceries helps to even out the more dramatic ups and downs in our State revenue stream so that government avoids disruptive and dysfunctional shortfalls and funding holdbacks needed to balance the budget.”

The Governor went on to explain his argument in greater detail, which was outlined in a letter to legislators during consideration of House Bill 67. 

“The State will return approximately $149 million to Idaho taxpayers through the grocery tax credit in fiscal 2019 starting on July 1, 2018, when House Bill 67 would become effective.”

“Removing the sales tax on groceries would reduce the State’s General Fund revenue by over $201 million in fiscal 2019.”

“Provisions in House Bill 67 to keep local units of government from losing any revenue sharing money as a result of the change would reduce the State’s General Fund by another $26 million.”

“Overall, the General Fund would be reduced by almost $80 million in fiscal 2019 alone, making it all the more difficult to meet our commitments to improving Idaho’s education system.”

“…I understand that House Bill 67 has captured the popular imagination.  It purports to provide tax relief for the working poor—a worthy ambition, but one already accomplished through the grocery tax credit.  The truth is this bill’s benefits are largely imaginary while the downsides are many and very real.  The job of all of us who represent and serve the people of Idaho is to do what’s right, not necessarily what’s popular.  It’s wonderful when the two align.  In this case, unfortunately, they do not.”

The legal challenge to the Governor’s veto is grounded in Article IV, Section 10 of the Idaho Constitution, which provides:

“Any bill which shall not be returned by the governor to the legislature within five (5) days (Sundays excepted) after it shall have been presented to him, shall become a law in like manner as if he had signed it, unless the legislature shall, by adjournment, prevent its return, in which case it shall be filed, with his objections, in the office of the secretary of state within ten (10) days after such adjournment (Sundays excepted) or become a law.”

While the constitutional provision seems clear, the 1978 Idaho Supreme Court case Cenarrusa v. Andrus provided that the Governor has 10 days to veto a bill after it is presented to him, not 10 days after the end of the legislative session.

The Idaho Secretary of State’s office, relying on this case, has accepted the Governor’s veto as valid. 

Download File (PDF)

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