Idaho sales tax declines from 6 to 5 percent

BOISE – Idaho’s sales tax drops back down from 6 percent to 5 percent today, disproving two years of widespread grumbling that taxes that go up are unlikely to come back down.

“Many were skeptical of the notion of a temporary tax,” said Gov. Dirk Kempthorne in a statement heralding the decrease. “But there is no question now that this tax was indeed temporary. We made a promise to the people of Idaho and I made it my top priority to see that we kept it. We have.”

Though falling taxes are “contrary to popular belief,” said Dan John, tax policy manager for the Idaho Tax Commission, Idaho actually has a long history of both raising and lowering taxes. The income tax “has been all over the board over the years,” John said, including notable decreases in 2001 and 2002. The sales tax, which started at 3 percent in 1965, went up to 4 percent in March of 1983, jumped to 4.5 percent three months later, and then fell back down to 4 percent in July of 1984.

Of course, two years later it went up to 5 percent, where it stayed until 2003, when lawmakers approved a temporary, two-year increase to 6 percent.

Two counties in the state – Kootenai and Nez Perce – also charge an additional half-cent sales tax to fund jail construction and property tax relief, and some resort cities impose an additional tax.

The lowering of the tax today by a penny on a dollar isn’t making much of a splash, but some buyers have been watching out for that penny. Pam Eaton, executive director of the Idaho Retailers Association, said some of her members who sell big-ticket items like appliances and cars have seen a noticeable drop-off in sales for the past two months as buyers waited for their savings.

“They’re all sure they’ll make it up, because they know exactly what people are doing,” Eaton said.

On a $1,000 refrigerator, the savings from the drop in sales tax is $10. A buyer of a $6,500 hot tub will save $65. Someone buying a new $25,000 sport utility vehicle will save $250.

But Kathy Sims, owner of Coeur d’Alene Honda, said she’s seen no evidence of any delayed purchasing or talk of the tax among her customers. “Honestly, I absolutely have not,” she said. “Sales have been as good as last year or better. Of course, this is a growing area, and we’re close enough to Washington that everyone here recognizes that we’re behind them anyway.”

Even when Idaho’s tax was at the higher 6 percent – or 6.5 percent in Kootenai and Nez Perce counties – it was well below Washington’s 8 percent-plus.

Asked if she’s expecting a boost in buying today from the lower tax, Sims said, “Gee, that’d be nice, wouldn’t it? I guess I’ll wait and see. … I don’t think anybody up here’s been paying attention. But now that you mention it, I’m not going grocery shopping until tomorrow.”

Randy Nelson, executive director of the Associated Taxpayers of Idaho, said an average family of four with an income of $56,483 can expect to save about $140 per year from the lowered tax. “It’s not something average families will feel too much,” he said.

Another indicator: When Boise State University’s annual public policy survey asked Idahoans last winter what they thought of the current sales tax – without mentioning the state was in the midst of a two-year tax increase to 6 percent – only 33 percent said it was too high. A whopping 63 percent said it was “about right.”