Senators split 5-4 late Wednesday, narrowly passing a $200 million income tax cut that earlier sailed through the House on a party-line vote.
Gov. Butch Otter proposed the big tax-cut bill, and House and Senate GOP leaders signed on as co-sponsors. But on Wednesday, two GOP senators — one of them the Senate tax chairman — joined the Senate tax panel’s two minority Democrats in opposing the bill.
Sen. Jeff Siddoway, R-Terreton — the former chair of the committee — stayed silent through the hearing, then joined Senate Tax Chairman Dan Johnson, R-Lewiston, in voting “no.” Asked afterward why he voted against the bill, Siddoway said, “I can’t imagine having a tax cut of this magnitude and families with children getting an increased tax. That’s the big part for me.”
The bill, which now heads to the full Senate, would make a series of changes to Idaho’s state income tax laws, including:
▪ Conforming Idaho’s tax code to recently approved federal changes, including the doubling of the standard deduction and the removal of dependent exemptions.
▪ Offsetting those changes — which would otherwise cost Idaho taxpayers nearly $100 million more in state taxes next year — with additional tax cuts: Lowering all personal and corporate income tax rates by 0.475 percent, or $159.6 million; and creating a new nonrefundable Idaho child tax credit of $130 per child, cutting another $42 million.
The federal tax-cut bill approved by Congress offset the impact on large families of removal of the personal exemption for dependents by doubling the federal child tax credit from $1,000 to $2,000, but Idaho currently has no child tax credit in its state income tax code.
The bill’s new, nonrefundable Idaho child tax credit of $130 per child is less than half the amount needed to offset the removal of the federal dependent exemption. That’s why larger Idaho families would pay more in state income taxes under the bill.
All told, the bill grants $201.9 million in tax cuts, but increases Idaho tax collections by $97.4 million due to the federal conformity changes. The net impact is that the state would collect $104.5 million less in tax revenue next year.
Sen. Grant Burgoyne, D-Boise, said, “What does HB 463 do? It raises taxes on people with three or more children in a state that is known for its large families. Why in the world would we do that? I have no idea.”
Burgoyne said, “The net cut here is too big a hit on state revenues, and I think as a result we won’t put the money to public safety, education and other government essentials that we should.”
He added, “Now, I’m not against tax cuts. I’ve supported some big tax cuts. There are some people in Idaho that are hurting and need tax cuts.” But, he said, “This bill asks people who need help to help the 1 percent, and I can’t support that.”
The Idaho Center for Fiscal Policy released a new analysis of the bill on Wednesday, finding, “Households with three or more children will generally pay hundreds more in taxes on average, unless their incomes are very high.” A family with an income between $39,000 and $63,000 and three children would pay $313 more in state taxes, on average, the analysis found. Meanwhile, a family with three children and an income of $459,000 would see a tax cut of $7,115.
The bill has 38 House co-sponsors and 13 Senate co-sponsors, all Republicans, in addition to the two top GOP leaders in each house.
“What this is, it’s a sure thing,” said Senate President Pro-Tem Brent Hill, R-Rexburg, who presented the bill to the committee. “It’s a $100 million dollar sure thing.” He noted that it’s already passed the House, and already has the governor’s support.
“This is the last obstacle — it’s a sure thing … to make sure that our citizens enjoy a $100 million tax cut. We can send this to the amending order and try to make it more perfect,” he said. “This committee will have to weigh the risk of that, because we may go home, just like we have the last five years, with nothing.”