“It’s true that our tax burden in Idaho is relatively light compared with other states,” Gov. Butch Otter told the House and Senate in his State of the State message today. “But our income levels also remain comparatively low, and beneath our own expectations.”
He noted that personal income in Idaho has grown about 40 percent since 2008, while general fund revenue to the state has grown less than 25 percent. “So despite some selective arguments to the contrary, our economy clearly is growing faster than our state government,” he said to applause.
“We must never forget that it’s the people’s money,” he said. “So I will gladly join you in reducing individual and corporate income tax rates with an eye toward stimulating more economic growth. But that must be accomplished while keeping our fiscal house in order and our investments for the future on track. To make that possible, I will be proposing a plan to enable Idaho’s substantial conformance with the new federal tax code without putting our state revenues or Idaho taxpayers at risk.”
Otter’s budget calls for conforming Idaho’s state income tax code to federal-level changes, which grows state revenues by $97.4 million. But at the same time, he’s proposing nearly $200 million in tax cuts – a cut in all the state’s income tax rates of 0.45 percentage points, which would drop the top rate from 7.4 percent to 6.95 percent; and an $85 non-refundable Idaho dependent credit from state income taxes. Between those tax cuts and the increased revenue from conformity, the net result is a reduction in revenue to the state of $94.7 million.
The income tax cut has a fiscal impact of $135.5 million a year to the state general fund for the individual income tax, and $13.7 million for the corporate income tax. The fiscal impact of the $85 dependent credit is $42.9 million a year.