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A plan to cut taxes?

AP reporter John Miller reported over the weekend that three House Republicans are working on legislation to cut Idaho's individual and corporate income tax rates, even as the state struggles to balance its budget in the face of falling tax revenues at the existing rates. House Majority Leader Mike Moyle, R-Star, and Reps. Raul Labrador, R-Eagle, and Marv Hagedorn, R-Meridian, are working up the plan; click below to read the full AP story.

GOP House lawmakers push tax cuts for 2010
By JOHN MILLER, Associated Press Writer

BOISE, Idaho (AP) — Republicans ahead of the 2010 Legislature are pushing to cut individual and corporate income taxes by more than a third over the next decade, saying it would lure businesses and pump life into Idaho's slumping economy.

Idaho's corporate income tax rate is 7.6 percent; for individuals, it's as high as 7.8 percent.

Both would be slashed to 4.9 percent under the plan from House Majority Leader Mike Moyle, R-Star, and Reps. Raul Labrador, of Eagle, and Marv Hagedorn, of Meridian. It's now being vetted by state tax officials.

Stretching out the tax cuts over 10 years would mitigate immediate impacts to state general fund tax revenue, already trimmed by 20 percent over two years as the economy sputters. Some revenue could also be recovered, possibly by dumping an investment tax credit for businesses worth $40 million annually.

But the three House tax hawks say the net effect of any changes should be a reduction for Idaho residents and companies that employ them. Idaho rates for individuals and corporations are higher than surrounding states, which the three contend means the state loses out when companies looking to relocate compare taxes, then go elsewhere.

"It's the whole debate of Reaganomics: Does cutting taxes spur growth?" Moyle told The Associated Press on Friday. "I think it does."

Tax Commission employees are currently estimating the value of proposed cuts, Hagedorn said.

In the 12 months ending June 30, Idaho individual income tax collections were $1.48 billion, down 13 percent from a year earlier, according to the state Tax Commission.

Corporate collections fell 18 percent to $175 million, as businesses including computer chipmaker Micron Technology Inc. racked up losses.

Nevada, Washington, and Wyoming don't have individual or corporate income taxes.

Utah's rates are 5 percent, according to the Federation of Tax Administrators, while Montana has a corporate rate of 6.75 percent and an individual tax rate of up to 6.9 percent. Oregon's corporate rate is 6.6 percent; individuals there pay as little as 5 percent.

Idaho also has a 6 percent sales tax, higher than the 4.8 percent national average.

In 2001, the last time Idaho lawmakers cut income tax rates, a recession that emerged later that year forced them to temporarily hike the sales tax to skirt cuts to schools and other state programs.

Gov. C.L. "Butch" Otter has dismissed the notion of a tax increases this year to fill budget coffers, but some Democrats say another temporary hike is the best option to shore up the 2011 budget starting in July. Rep. Shirley Ringo, a Moscow Democrat, supports a 5 percent charge on high wage earners to raise $44 million annually.

Given the economic backdrop, Ringo says the House GOP plan is irresponsible.

"We're in a huge crisis," she said. "What they're suggesting would be very detrimental to the people of this state."

Moyle concedes his proposal will be controversial, given that slumping tax revenue already has caused Otter to order $151 million in spending cuts at public universities, the Department of Health and Welfare and prisons.

Also, while conservative GOP House members like him generally applaud anything aimed at trimming taxes, the Senate could object to any plan its members conclude will exacerbate Idaho's yawning budget chasm.

"We don't want to bring something, just to have the Senate knock it down," Moyle said.

Contacted Friday, Sen. Brent Hill, a Rexburg Republican and head of his chamber's tax committee, said he's aware of the House proposal and wants to gather more details before weighing in.

Copyright 2009 The Associated Press.

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Betsy Z. Russell
Betsy Z. Russell joined The Spokesman-Review in 1991. She currently is a reporter in the Boise Bureau covering Idaho state government and politics, and other news from Idaho's state capital.

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