Record $600M in Idaho tax cut heads to governor's desk

By KEITH RIDLER

Associated Press

BOISE — Legislation for Idaho’s biggest tax cut in state history headed Tuesday to the governor for his signature.

The Senate voted 27-7 with no Democratic support to approve the record $600 million cut that includes a one-time $350 million in rebates and $250 million in permanent income tax reductions going forward for people and businesses.

Republican Gov. Brad Little has twice sent his budget chief to testify on the bill’s behalf at committee meetings in the House and Senate to indicate his support.

“Tax relief is on the way!” Little tweeted within minutes of the Senate vote. “Thank you to the Idaho Senate for passing a historic tax cut for Idahoans!”

Little promoted the tax cut in his State of the State Address last month as part of his “Leading Idaho” plan that also includes a record $300 million education spending increase, plus spending $200 million ongoing for roads and bridges, the largest ever increase for transportation. But the tax cut is the first of Little's measures that lawmakers have taken up.

The $350 million tax rebate includes 12 percent of state income taxes returned for filers during 2020, or $75 per taxpayer and dependent, whichever is greater. That money will come from the state’s $1.9 billion budget surplus.

The permanent tax cuts reduce income tax rates, including dropping the top rate from 6.5 percent to 6 percent and reducing the number of individual income tax brackets from five to four.

People making more than about $8,000 and couples making more than about $16,000 are in the top tax bracket in Idaho, meaning Idaho income tax is essentially a flat tax with most paying the same rate.

Corporate income taxes under the bill would be cut from 6.5 percent to 6 percent. Backers of that cut said it would keep Idaho competitive with surrounding states in attracting businesses. The individual and corporate tax cuts would be retroactive to Jan. 1.

The tax cuts take “money off the table and returns this money, which is not our money," said Republican Sen. Steve Vick. "This money belongs to the people who work here and live here, and they should have it back in their pocket.”

Lawmakers opposed to the bill said the tax cuts mostly benefit the wealthy.

“This is people who are saying ‘Heads I win, tails you lose,’” said Democratic Sen. Grant Burgoyne. “That's the problem with these tax cuts year after year after year. Who gets the benefit? The people at the top.”

The tax cut bill is the first to head to Little for his signature. Opponents said taking $600 million in potential state funding off the table before bills dealing with education spending or fixing roads had been passed was a mistake.

“We have not yet passed any bills that are investing those dollars, and we have many places in Idaho that we would like to invest,” said Democratic Sen. David Nelson.

Some lawmakers also said they would have preferred proposals for property tax cuts or the elimination of the grocery sales tax, though Idaho already refunds money on taxes paid on food.

Nelson noted that Idaho's $1.9 billion surplus is likely at least in part due to the billions of dollars of coronavirus relief money that has flowed into the state.

“I probably would not have spent this much money this way,” said Republican Sen. Jim Guthrie, who voted for the bill but noted he would have rather spent the $350 million in rebates for infrastructure improvements for K-12 and higher education buildings and facilities.

“Once that federal spigot dries up, what is the real state of our economy?” he said. “If it sounds like I'm being overly cautious, let me just say that it has always been easier to do a tax cut than a tax hike.”

Republican Sen. Scott Grow said reducing income tax rates would make the state more competitive with surrounding states. He noted that Idaho has taxes on property, income, and sales.

“The one that seems most out of whack right now compared to other states is the income tax,” he said. “So we're addressing that one first. Other things will be addressed. Property tax bills are coming down the pike."

Grow added: "So I wouldn't get overly worried about this being the first bill and thinking that everything has been spent. There is a lot of money still to be allocated out for the needs that have been mentioned.”