Senate President Pro-Tem Brent Hill, R-Rexburg, a retired CPA, told the Senate, “I get excited about tax policy – I guess it’s one of my character defects. And I get excited talking about this bill.” He’s presenting HB 463, the $200 million income tax cut bill, to the Senate for debate. “Tax policy is exciting – it affects every family and every citizen in the state,” Hill said.
The bill makes a series of changes to Idaho income taxes, including:
-Conforming Idaho’s 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 otherwise 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.
The federal tax cut bill approved by Congress offset the impact on large families of removal of the personal exemption for dependents by doubling the federal child tax credit from $1,000 to $2,000, but Idaho currently has no child tax credit in its state income tax code.
The bill’s new, nonrefundable Idaho child tax credit of $130 per child is less than half the amount needed to offset the removal of the federal dependent exemption. As a result, larger Idaho families would pay more in state income taxes under the bill, unless their incomes are very high, in which case the rate changes would more than offset the difference.
“$130 does not offset the tax savings that they’re losing by not getting that 4,000-some-odd dollar deduction that they had in the past,” Hill said. “The fact is there are families that have a large number of children, four, five, six children, and because of the way it is structured, they end up paying more in state taxes than they would. … I don’t like that. I wish our child tax credit were higher, but that is the way it is, there are some winners and there are some losers.” However, he said he believes many large families also own small businesses, and the new 20 percent deduction for small business earnings contained in the bill would help them.
All told, the bill grants $201.9 million in tax cuts, but increases Idaho tax collections by $97.4 million due to the federal conformity changes. The net impact is that the state would collect $104.5 million less in tax revenue next year.
"It's been five years since we've had significant tax relief in the state of Idaho," Hill told the Senate.