Idaho House approves big tax-cut bill in party-line vote

The Idaho House voted along party lines in favor of a $200 million-plus income tax cut on Wednesday, after more than an hour of heated debate.

More than a dozen Republicans joined the 11 House Democrats in a move to sidetrack the bill for amendments, but that fell short; when the bill was up for a final vote as-is, all House Republicans supported it.

Gov. Butch Otter proposed the big tax-cut bill. House and Senate GOP leaders signed on as co-sponsors.

Rep. John Gannon, D-Boise, said, “This bill is contrary to 50 years of tax history, because it eliminates a longstanding child dependent credit, it fails to adequately replace that deduction, and the result is a tax increase on Idaho families with children. In a bill that is supposed to reduce taxes, this bill actually increases taxes on families with children.”

The measure, which lead sponsor and House Majority Leader Mike Moyle, R-Star, described as “arguably the largest tax cut in Idaho history,” would make a series of changes, including:

Conforming Idaho’s income tax code to recently approved federal changes, including the doubling of the standard deduction and the removal of dependent exemptions.

Offsetting those changes – which would cost Idaho taxpayers nearly $100 million more in state taxes next year – with additional tax cuts: Lowering all personal and corporate income tax rates by 0.475 percent, or $159.6 million; and creating a new nonrefundable Idaho child tax credit of $130 per child, cutting another $42 million.

Moyle said Idaho’s individual and corporate income tax rates, which currently top out at 7.4 percent, are higher than those in most surrounding states. “Guys, if you have a business, why would you come to Idaho?” he asked the House. “If you have a family, why would you come here and pay Idaho’s exorbitant income tax?”

Though it’s now passed the House, the measure’s fate in the Senate is uncertain, as Senate Tax Chairman Dan Johnson, R-Lewiston, said he’s planning to hold it while he works on an alternative proposal that would handle the conformity issues differently, resulting in more net tax relief for Idaho families.

Reps. Ron Nate, R-Rexburg, and Heather Scott, R-Blanchard, led two attempts to sidetrack the bill, the first seeking to open it up for amendments, and the second to divide it in half, so the tax cuts and the federal conformity issues could be voted on separately. In both cases, they got support from all 11 House Democrats.

But the move to split the bill drew just seven GOP votes, after Nate and Scott said their objective was to reject conforming with the federal tax code because it recognizes same-sex marriage.

Scott told the House that opening up the bill to amendments would allow lawmakers “to add grocery tax repeal and possibly make some other changes.” House Minority Leader Mat Erpelding, D-Boise, who seconded Scott’s motion, said his aim in backing that move was to add a larger child tax credit.

Rep. Ryan Kerby, R-New Plymouth, said he was “barely” in support of the bill, because he wanted to remove the child tax credit entirely and replace it with a repeal of Idaho’s 6 percent sales tax on groceries – something lawmakers approved last year, but Gov. Butch Otter vetoed.

A day before the vote, the Idaho Center for Fiscal Policy released an analysis of the bill and found that it would increase taxes on larger middle-class families while shifting the tax load away from wealthier Idahoans.

The federal tax-cut bill approved by Congress doubled the standard deduction while removing the personal exemption for dependents. Congress offset the impact of that move on large families by doubling the federal child tax credit from $1,000 to $2,000, but Idaho law currently has no child tax credit in its state income tax code.

The bill includes a new, nonrefundable Idaho child tax credit of $130 per child, but that’s less than half the amount needed to offset the removal of the federal dependent exemption. That’s why larger Idaho families would pay more in state income taxes under the bill.

All 11 House Democrats debated against the bill, with each highlighting a different area of the state budget, from education to infrastructure to health care, where they said pressing needs will go unmet as Idaho trims back its state tax revenues due to the tax cut. “I oppose this fiscal policy – I think it’s ruinous,” said Rep. Sue Chew, D-Boise. “Instead, I support investing in Idaho’s future, with health care of our Idahoans front and forward in our focus.”

Nate told the House, “While this bill is a good start to cutting taxes, there’s a lot more that could be done.”

Moyle bristled at suggestions that the cuts would benefit only the wealthy. “If you don’t pay taxes you don’t get a tax cut,” he said. “It just drives me nuts. … It tries to make Idaho more competitive, it helps everybody who pays taxes.”

To become law, the bill still would need Senate passage and the governor’s signature.