Idaho state Commerce Director Jeff Sayer has dropped a bombshell on the Legislature’s Tax Working Group this morning: He says Idaho shouldn’t lower its taxes. Instead, it should invest in developing a talented workforce, because that’s what’s now driving business decisions for expansion and relocation, not tax rates.

“Four years ago, I would have said, yes, we need to have lower taxes to make ourselves competitive,” Sayer said. “I’m here to tell you, what we’re seeing is the return for the state is not lowering taxes, it’s investing in talent.” He said he still believes lowering taxes is a good idea in the long term, but not right now – the state will get more return from investing in talent, he said.

Sayer said an Idaho Department of Labor analysis looking out 10 years projected that Idaho will create 108,000 jobs over the next 10 years, and will draw 107,000 new residents. But most of those will be over 65, as Idaho becomes increasingly attractive for retirees. Idaho will be far short of the workers it needs for its jobs, Sayer said.

He said companies are no longer talking about Idaho’s tax rates; they’re talking about their need for talent. “I just met with one,” he said. It was looking at an expansion “adding 250 employees, 50 of those were skilled workers.” But, he said, “They’re suspending the whole expansion because they’re not confident they can find the 50 skilled workers they need to run their plant.” He added, “My point is simply this – in all of those conversations we’ve had with industry leaders, not one of them has brought up tax rates.”

He said Boise State University’s computer science department is a prime example of the kind of “talent pipelines” Idaho needs to develop. It had 25 graduates a year; investments pushed that to 50. This year, the Legislature funded the university’s request to expand that to 100 graduates. Tech companies from the Silicon Valley are calling BSU’s computer science department, Sayer said, instead of calling the Department of Commerce – and they’re saying they can’t move here until the number of computer science graduates a year rises to 100 or 200.

Sen. Steve Vick, R-Dalton Gardens, said, “You haven’t explained how not cutting taxes grows the talent pool. … I’m curious as to how you think keeping taxes at their current level” will bring talent to Idaho. Sayer responded, “It’s about where we invest our capital. … We need to be careful and think where the highest return for Idaho is. ... What I’m saying is we need to be spending that on talent.” He said, “We need to make specific tactical investments that draw industry and education together.”