What effect with the federal tax bill have on Idaho’s state budget? That’s been the big-bucks question, so there was far more suspense than usual surrounding state Tax Commission Chairman Ken Roberts’ presentation Friday to the Legislature’s Economic Outlook & Revenue Assessment Committee. Roberts noted that there’s not much effect for 2017 tax conformity, but there is for tax year 2018 – which equates to fiscal year 2019, the year for which lawmakers will be setting the budget during this year’s legislative session. And if Idaho conformed to all the federal changes, the bottom line comes to this: An additional $97.4 million to the state’s general fund.
That’s right – Idahoans would actually pay more in state taxes as a result of the tax-cut bill that Congress passed. That’s in part because the doubling of the standard deduction would cause a $340.5 million decrease to Idaho’s general fund, but the removal of the personal exemptions, which taxpayers now get for themselves and each of their dependents, would mean a positive of nearly $412 million. Other changes would add and subtract, finally ending up with the bottom line of plus-$97.4 million.
Idaho's state income tax is based on the federal system - the state uses federal adjusted gross income as the starting point for state income tax return calculations. That's why conformity to federal changes has such a big impact.
Lewiston Tribune reporter Bill Spence reports that individual taxpayers in Idaho would collectively pay almost $119 million in additional taxes, assuming full conformity. Idaho businesses, by contrast, would save about $21 million per year.
Rep. John Gannon, D-Boise, noted that eliminating the personal exemption removes any break for larger families. Congress addressed this by doubling the child tax credit to $2,000, but Idaho doesn’t have a child tax credit in its state income tax laws. Some lawmakers are now interested in creating one; Gannon asked Roberts to supply lawmakers with the fiscal impact of mirroring the federal child tax credit.
Sen. Fred Martin, R-Boise, co-chair of EORAC, said, “Whether or not we conform will have to be dealt with in each body.”
Rep. Steve Miller, R-Fairfield, requested information on how the federal tax changes would affect Idaho taxpayers at various different income levels. “It’s really hard to absorb everything you’re saying,” he told Roberts, and get a sense of “how a particular family comes out at the bottom line.”
“You are exactly where we are,” Roberts responded. He said Tax Commission officials are working on estimates for average Idaho families of various sizes, but don’t have all the variables pinned down yet. More detailed discussions likely will follow in the House and Senate tax committees during the upcoming session, he said.