Idaho House approves massive income tax cut and rebate plan

BOISE, Idaho (AP) — The Idaho House on Wednesday approved a massive income tax cut backers say provides much-needed relief for taxpayers but opponents say is a massive giveaway to the rich that will result in long-lasting harm.

Lawmakers voted 58-12, with all Democratic lawmakers opposed, to send the bill to the Senate.

The plan includes $169 million in ongoing income tax cuts for individuals and corporations and a $220 million rebate to Idaho residents who paid taxes for 2019.

The ongoing tax cuts involve lowering Idaho’s top corporate and individual tax brackets from 6.925 percent to 6.5 percent. The other six tax brackets would also be cut.

Idaho has seven tax brackets, and some lawmakers during the debate on the House floor said that an individual would only have to make $11,760 to hit the state’s top tax bracket, which is a number listed on the Idaho State Tax Commission's website.

However, the commission after the debate said that figure represents taxable income, not gross income. Idaho's standard tax deduction is $12,400, so a person would have to make $24,160 to make it into the top tax bracket, the commission said.

The rebate portion of the plan will provide a minimum rebate of $50 for each taxpayer and dependent from their 2019 taxes or, alternatively, 9% of income taxes paid in 2019, whichever is greater.

“Tax relief by definition is for those that pay taxes,” Republican Rep. Jason Monks said during debate on the House floor. “You can’t provide tax relief for somebody who doesn’t pay taxes. This bill is about income tax relief, and it’s a pretty good bill in my opinion.”

But Democratic House Minority Leader Ilana Rubel disagreed. “For those who fear that their government is only working for the wealthy, this really brings their worst fears into relief into the worst possible way,” she said.

The tax cut and rebate are mostly being paid for with money from Idaho's tax relief fund, Republican Rep. Steven Harris said.

The tax relief fund collects sales tax from online purchases. It's estimated to bring in $110 million a year. This fiscal year it will be about $135 million.

Of the $169 million in ongoing income tax cuts, $110 million is from the tax relief fund. This year, another $59 million is coming from the state’s general fund.

Of the $220 million rebate, $180 million is from the tax relief fund that has been building for several years. Harris said the other $40 million will be covered from what he described as $63 million the state saved by not conforming with a section of federal tax code.

The tax bill arrives as Republican attorneys general from 21 states, including Idaho Attorney General Lawrence Wasden, question a provision in the $1.9 trillion pandemic rescue plan that bars states from using its funds to offset tax cuts.

Democratic House members said the Idaho tax plan appears to run afoul of a provision in the pandemic rescue plan that bars states from using its funds to offset tax cuts.

But Republican lawmakers said state money was paying for the tax cuts, and that the state wasn't backfilling to replace tax cut money with pandemic rescue money.

Republican Rep. Greg Chaney said that even if the tax plan did conflict with federal requirements, Idaho could win in court.

“I don't believe that we are backfilling. But if that is the decision of the United State Department of Treasury, then game on,” he said.

The tax cut bill is being fast-tracked as the Republican-dominated Legislature tries to adjourn next week.