Under ‘Big Beautiful Bill,’ will Idaho subsidize other states’ growth? Experts weigh in
This winter, Idaho lawmakers will decide whether — and how much — to align the state’s tax policy with federal tax policy. Will the state incorporate the federal government’s new personal and corporate tax breaks into its own tax code?
Lawmakers are still weighing the costs to the state of doing so and have yet to decide on an approach, House Speaker Mike Moyle, R-Star, told the Idaho Statesman.
But amid that discussion, one Idaho think tank on Thursday issued a warning: If lawmakers do choose to adopt the federal tax code, the state stands to lose nearly $300 million in revenue. Even worse: Nearly half of those tax breaks, which would go to corporations, would “primarily benefit businesses in other states,” the Idaho Center for Fiscal Policy said.
Idaho can only tax businesses in the state on the proportion of profits they made in that state — say, in the Walmarts located in Idaho, May Roberts, the author of the report, told the Statesman. But businesses can deduct from those taxes their expenses incurred nationwide, she said — and the new federal tax code expands the pool of those possible deductions.
For example, the new federal tax code allows businesses to deduct the cost of spending on research and development. A company with offices in both Idaho and New York City might invest in such research in its New York facility, but — if Idaho lawmakers adopt the federal tax code — would also be able to claim the deduction in Idaho.
In that situation, said Matt Gardner, a senior fellow at the Washington, D.C.-based Institute on Taxation and Economic Policy, Idaho may be effectively subsidizing economic growth in another state.
“The difficulty, in a nutshell, is — to the extent there is any incentive effect, any economic growth effect from these tax breaks — there’s no way as a state lawmaker that you can steer that toward your state,” he said. “You’re subsidizing this incentive wherever it goes, wherever jobs are created, wherever the investment happens.”
Adopting these federal tax cuts for businesses could, at least in theory, attract businesses to Idaho, said Seth Ruhter, who teaches courses on economics and corporate finance at the College of Idaho.
“Anything that helps, we’re more tax-free than our neighbors — that all helps,” he said.
But Michael Mazerov, a corporate tax consultant at the Washington, D.C.-based Center for Budget and Policy Priorities, said state income tax deductions for companies were “very small potatoes” compared with other kinds of incentives to set up shop in a given state.
For that reason, he told the Statesman, many states have declined to conform with some previous federal tax incentives, such as deductions on large capital investments like machinery. The loss of revenue for the state budget, they’ve decided, “far outweighs any incentive effect it might have” on a business locating in their state.
The cost of implementing those incentives — the amount of revenue the state stands to lose — remains an open question, some said.
“It’s too soon to know the exact amount of hard-earned dollars Idahoans will get to keep,” said Joan Varsek, a spokesperson for Gov. Brad Little, but Little is “confident we will be able to make room for the tax cuts in the state budget by responsibly right-sizing government spending to match the taxpayers’ means.”
Lawmakers do not have to conform with the entire federal tax code. Instead, they can adopt the federal tax code with modifications or exceptions. State tax conformity bills are made retroactive to Jan. 1 of each year.
This story was originally published November 9, 2025 at 4:00 AM.
