For 2nd consecutive year, Idaho’s wealthiest would get largest tax cuts in new GOP bill
A new bill would provide Idaho’s highest earners with the largest tax cuts for the second consecutive year.
A GOP proposal for individual and corporate tax cuts would reduce the top-bracket income tax rate — $5,000 or more in taxable income — as well as the corporate tax rate from 6.5% to 6%. It would also provide tax rebates dependent on earnings. The more taxable income an Idaho resident had in 2020, the larger the rebate.
Republican Gov. Brad Little announced the tax cuts Monday during his State of the State address, and lawmakers quickly pushed the proposal through a committee Wednesday — the first bill introduced in the 2022 session. The proposed cuts come as the Legislature mulls how to spend a $1.9 billion surplus, which is made up, in part, of increasing income tax revenues.
Sponsored by Rep. Steven Harris, R-Meridian, House Bill 436 sets aside $350 million for rebates, which would cover either 12% of someone’s 2020 income taxes or $75 per taxpayer and dependent, whichever is greater.
“The bill does just a few simple things but has a dramatic fiscal impact, both for our taxpayers and, I suppose, also for the state government,” Harris told the House Revenue and Taxation Committee Wednesday.
The committee almost unanimously voted in favor of a motion to introduce the proposal. House Assistant Minority Leader Lauren Necochea, D-Boise, was the sole committee member to oppose it.
“This is just not the tax relief I think Idahoans want,” Necochea said.
Democrats condemn income tax cuts, call for property tax relief
Democrats earlier this week denounced the Republican-backed tax cuts, advocating instead for property tax relief. House Minority Leader Ilana Rubel, D-Boise, told reporters Monday that the cuts are a form of trickle-down economics, which “does not work.”
“This legislature has been a one-trick pony for years,” Rubel said. “Every time we have any money in the bank, GOP legislators rush to pass a bill to give that money away in income tax cuts to the wealthiest individuals and corporations.”
Harris’ bill would also reduce the tax rate for the second-lowest tax bracket — those whose taxable income is between $1,000 and $3,000 — from 3.1% to 3%. And it would reduce the number of tax brackets from five to four by combining the second- and third-highest.
Rebates would create ‘positive business climate,’ Bedke says
House Speaker Scott Bedke, R-Oakley, told reporters Monday that the tax cut is about “reaping the rewards of creating a positive business climate” and “taking care of the essential things that government needs to take care of.”
If the bill passes in its current form, it would be the second consecutive year the Idaho Legislature cut income taxes, reduced the number of tax brackets and provided rebates. Last year, a bill passed by the Legislature reduced top individual income and corporate tax rates from 6.9% to 6.5%, and it provided rebates based on 9% of 2019 income tax or $50.
The Idaho Center for Fiscal Policy, a nonprofit policy research firm, released a report that said eliminating two tax brackets would make Idaho’s tax system “more regressive,” because the tax burden shifts increasingly to taxpayers who earn less. The report also said last year’s bill created “heavily lopsided” tax cuts. Households with very modest earnings would receive an $82 average tax cut, while the top 1% would receive an average tax cut of $8,883.
“It is still true that eliminating another tax bracket means that our tax system would then fall more heavily on moderate- and low-income Idahoans,” Alejandra Cerna Rios, director Idaho Center for Fiscal Policy, told the Idaho Statesman by phone Wednesday.
Otherwise, the new bill “looks promising,” Cerna Rios said. Amid rising prices and a COVID-19 surge, “Idahoans can really use this one-time rebate,” she said. But she said the Legislature should consider establishing an earned-income tax credit, a federal program that reduces taxes owed for low- and moderate-income workers.
Following Little’s speech Monday — when the governor said the tax cuts and rebates would benefit “working families” — Cerna Rios said an earned-income tax credit would be more beneficial for working families.
“We are concerned that a tax rebate not tied to employment status would exclude some Idahoans,” Cerna Rios said in an emailed statement. “I urge policymakers to consider a new tax credit based on earned income that will reflect our values of hard work and fairness.”
This story was originally published January 12, 2022 at 12:25 PM.
