Idaho Gov. Butch would consider a proposal from House Speaker Scott Bedke to shift money from a popular grocery tax credit to individual and corporate income tax cuts, AP reporter John Miller reports. “Convince me,” Otter told the AP on how he's approaching Bedke's proposal. Idaho residents now claim the grocery credit, worth up to $100 for each person in a household, or $120 for those over 65. Bedke would limit beneficiaries to the elderly and low-income residents earning just 138 percent of the federal poverty line; the difference would be shifted to lowering Idaho's top income tax rate for high earners and for corporations. House Majority Leader Mike Moyle, R-Star, expressed concerns about the plan, however, saying it would amount to “picking winners and losers.” Click below for Miller's full report.
ID's Otter open to shifting food credit to tax cut
By JOHN MILLER, Associated Press
BOISE, Idaho (AP) — Gov. C.L. “Butch” Otter would consider a proposal from House Speaker Scott Bedke to shift money from a popular grocery tax credit to individual and corporate income tax cuts.
“Convince me,” Otter told The Associated Press Wednesday, on how he's approaching Bedke's proposal.
Idaho residents now claim the grocery credit, worth up to $100 for each person in a household, or $120 for those over 65.
However Bedke would limit beneficiaries to the elderly and low-income residents earning just 138 percent of the federal poverty line or less — about $23,550 for a family of four — while redirecting $70 million to $80 million in savings to cutting Idaho's tax rate to 6.95 percent, from 7.4 percent.
Opting for such a plan could attract businesses seeking to relocate, Bedke, a Republican from Oakley, said.
Since 2007, Otter has championed increasing the credit to offset sales tax paid on food, but now says he's willing to entertain redirecting the money, potentially for tax relief or education funding. Otter contends that one reason Bedke's idea has merit is that more-affluent people don't really need the grocery credit, so the money could be used to further more-pressing public policy goals that would help Idaho.
“I don't need the…grocery credit,” Otter, a millionaire, told The Associated Press. “If you're saving $100 in some places, you could spend it in other places. Obviously, the early talk is about a tax cut. I'm not going to talk about it, until I talk to Bedke.”
In fact, when Otter originally proposed expanding the grocery tax credit he sought to tie it to a means test based on a person's income.
At the time House leaders rejected that plan and passed a proposal that gave everybody the same credit, regardless of what they earned, on grounds that doing otherwise would create “class warfare.”
Otter vetoed that plan, however, saying it was too expensive and didn't direct relief to those who needed it most.
It took until 2008 before lawmakers and Otter finally agreed on the existing scheme, in which the credit for nearly every resident has been rising by $10 every year until 2015 when it will top out at $100. Currently, most people who file tax returns receive an $80 credit for each household member, with low-income residents getting $100 and elderly residents $120.
The estimated cost of the credit annually to the state in refunds to residents is now about $133 million, Bedke estimates.
On Wednesday, Bedke told AP that directing more than half that money toward individual and corporate income tax relief would help make Idaho more attractive for businesses seeking to relocate.
States surrounding Idaho have lower income tax rates; cutting Idaho's to 6.95 percent would put the state close to Montana, with its maximum income tax rate of 6.9 percent.
“We've got $133 million in tax policy just sitting there, arguably idle,” Bedke said. “Why don't we redirect it in a way” that helps Idaho's economy?
On Wednesday, the Idaho State Tax Commission didn't immediately have information about how the change being promoted by Bedke would impact taxpayers, depending on their income.
However, higher-earning Idaho residents or businesses under the plan could see a tax benefit, since they already pay the largest percentage of Idaho's income tax, and people who earn income closer to 138 percent of the poverty line — Bedke's initial proposed threshold for qualifying for the grocery tax credit, should his plan be adopted — could potentially see a higher overall tax liability.
House Majority Leader Mike Moyle, the Republican lawmaker who in 2007 called Otter's original means-adjusted proposal “class warfare,” has similar concerns about Bedke's proposal now because some people would likely wind up paying more than they do now.
He's willing to discuss the plan, but says he'd be more inclined to finding money elsewhere to reduce the income tax rate, rather than take it from the grocery tax credit.
“You're picking winners and losers,” said Moyle, R-Star. “Where's the break-even point? Who are the winners and losers?”
Copyright 2014 The Associated Press