The poorest Idahoans spend a larger share of their income on state and local taxes last year than wealthier Idahoans did, a new study says.
The lowest-earning 20 percent of Idahoans (earning less than $20,400 per year) spent 9.2 percent of their family income on taxes last year, the study says. The highest-earning 20 percent (earning at least $88,200 per year) spent 7.5 percent on taxes.
The study, “Who Pays?” by the Institute on Taxation and Economic Policy, looked at expenditures on income, property and sales/excise taxes. It did not include federal taxes. The institute, a nonprofit think tank n Washington, D.C., says it provides “a voice for working people” in tax debates.
Idaho has a progressive income tax structure, meaning higher earners pay at higher tax rates. State income taxes were the only tax category in which the wealthiest one-fifth of Idahoans spent a larger percentage of family income than lower-earning residents, the study said.
On average, the top 20 percent spent 4 percent on personal income tax, and the wealthiest 1 percent spent 4.6 percent. Idaho’s poorest 20 percent was in the negative — spending -0.1 percent of earnings on personal income tax, meaning they got some tax money back. The second, third and fourth 20 percent of earners spent 0.8 percent, 1.5 percent and 2.6 percent, respectively.
Low-income Idahoans were hit hardest by property and sales taxes, ITEP reported. The lowest-earning segment spent 3.3 percent of income on property tax and 6 percent of income on sales and excise taxes (the latter are sometimes known as “sin taxes”).
“Sales taxes inevitably take a larger share of income from low- and middle-income families than from rich families, because sales taxes are levied at a flat rate, and spending as a share of income falls as income rises,” the report said.
The wealthiest 20 percent of Idahoans spent relatively small portions of their incomes on property taxes (1.6 percent) and sales/excise taxes (1.7 percent). The wealthiest 1 percent in the state spent just 0.9 percent of earnings on sales and excise taxes.
“When you account for the various state and local taxes we pay in Idaho, our tax structure is not balanced across income levels,” said Alejandra Cerna Rios, policy director for the Idaho Center for Fiscal Policy, a Boise nonprofit.
State Rep. Gary Collins, chair of the Idaho House Revenue and Taxation Committee, sees it differently.
“People talk about wealthy folks paying less on taxes, and maybe they do. But they pay the most toward taxes (overall),” Collins said.
And lawmakers may help low-income people by eliminating taxes on groceries, Collins said. Idaho legislators have proposed that in the past. Collins said he’s confident the issue will resurface in the 2019 session.
Earlier this year, the Idaho Legislature passed a bill that lowered income tax across salary brackets in a move meant to save Idahoans money.
A February analysis by the Idaho Center for Fiscal Policy estimated that low-income Idahoans would see almost no effect, while middle-class families’ taxes might actually go up. The top 1 percent of Idahoans could see their taxes lowered by $4,000 to $7,000, according to the center.
Despite what ITEP calls a “regressive” trend in the state’s effective tax rate, Idahoans are doing better than many other Americans. Idaho was 38th on the organization’s “inequality index,” a ranking of effective tax rates in each state. Idaho also has a lower tax burden than many other states.