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Eye On Boise

In dramatic turnaround, Senate transforms income tax-cut bill into grocery tax repeal

In a dramatic showdown on the floor of the Idaho Senate this afternoon, backers of removing the state’s 6 percent sales tax from groceries successfully held off a series of amendments proposed by the Senate’s top GOP leader to a House-passed tax cut bill, and instead pushed through new amendments to convert HB 67 into a bill repealing the tax on groceries.

“This is a matter of equity. I think it’s a matter of fairness,” said Sen. Cliff Bayer, R-Boise, who led the grocery-tax repeal effort – and earlier announced that he had 48 co-sponsors, among Idaho’s 105 legislators, for the repeal bill. “Its timing is right. It has support.”

Backers of the grocery tax repeal had been unable to even get a hearing for their bill in the House Revenue and Taxation Committee, as House GOP leaders favored income tax cuts instead.

Bayer’s amendment is a “radiator cap” – so called because it’s like the House-passed income tax cut bill was a vehicle that was pulled in for service, and service workers removed everything but the radiator cap, then drove a new vehicle in and screwed the cap back down, creating an entirely new vehicle.

The new HB 67 would launch a two-year phase-out of Idaho’s current $100-per-person annual grocery tax credit, which Idahoans claim on their income tax returns each year, to be replaced by the removal of the sales tax from food.

Thirty-seven states – including Washington – don’t charge sales tax on groceries.

Sen. Jeff Siddoway, R-Terreton, said, “I am sensitive to those communities along the borders with states that have lower or no sales tax than the state of Idaho. But you know, senators, this is just another exemption. And it further complicates our system. If we keep giving these exemptions over and over, pretty soon we’re going to have a 7 percent sales tax.”

He also argued that businesses don’t care about the sales tax on groceries, but Bayer disputed that.

“Businesses do care about this – from the small, ma-and-pa grocery stores that have closed in places like Fruitland, to the larger-format stores that point to this issue (when they decide) … which side of the river they locate on,” Bayer told the Senate. “it’s a big business factor. This is not just another exemption. This is trading a credit, with some bridge money, for an exemption.”

He added, “You’re taking a credit off the books. You’re simplifying the income tax form, including tens of thousands of forms that go in just for this credit.”

Bayer said, “Now’s the time. … We’re at the crossroads. What a great state, what a blessing, what an opportunity to even have this discussion.”

Today’s move destroys a compromise on tax cuts that had been emerging between the House and the Senate. While the House had passed a $51.2 million a year income tax cut – cutting the top personal and corporate income tax rates from 7.4 percent to 7.2 percent and also exempting the first $750 in taxable income, permanently – Senate President Pro-Tem Brent Hill R-Rexburg, had favored trimming that back to a one-tenth of a percent rate cut in all of Idaho’s income tax brackets, dropping the top rates from 7.4 percent to 7.3 percent. That would have reduced the tax-cut bill’s cost to the state general fund to $27.9 million a year.

The grocery tax repeal bill has a fiscal impact of $18.6 million to the state general fund next year, in fiscal year 2018; and $26.1 million in the second year of the two-year phaseout, fiscal year 2019.

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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