BOISE – A bill to lower Idaho’s top tax rate for both personal and corporate taxes cleared a House committee Tuesday on a party-line vote.
The bill would lower the top tax rate to 7.2 percent, from 7.4 percent, for both personal and corporate income taxes. It also would exempt the first $750 in taxable income from the state’s income tax, to grant a break for those at the bottom as well as those at the top.
Almost half of Idaho’s taxpayers are in that upper bracket. For a family of four taking standard deductions, that equates to a household income of $39,605; for a single person, $21,255.
“The fact of the matter is Idaho’s income tax rate is out of whack,” said House Majority Leader Mike Moyle, who sponsored the bill. “Every one of your chambers has said … we need to look more competitive on the balance sheet. We need a lower income tax rate.”
Washington has no state income tax; neither does Nevada. But Moyle said Idaho’s top tax rate of 7.4 percent is higher than Montana’s 6.9 percent and Utah’s 5 percent. Oregon’s top rate is 9.9 percent; Wyoming’s is 7.65 percent.
If approved, the bill would mean an estimated $51.2 million less for the state’s general fund every year going forward.
All Republicans on the House Revenue and Taxation Committee voted in favor of HB 67, while the two minority Democrats on the panel voted no.
The panel’s two Democratic members, Reps. John Gannon and Mat Erpelding, both of Boise, said the state can’t afford to maintain its transportation infrastructure and other pressing needs. Gannon pointed to the current harsh winter and soaring snow-removal costs, and a busy stretch of freeway in Canyon County that had to be closed for emergency pothole repairs.
Erpelding said, “The reality is there’s a right time for everything, and this isn’t the right time.”
But Rep. Stephen Hartgen, R-Twin Falls, said, “The economy is doing pretty well. If this is not the time for a significant tax decrease, I don’t know that there’s ever a time.”
Rep. Ron Nate, R-Rexburg, said he wanted bigger tax cuts. “This tax bill is weak sauce compared to what we can be doing,” he said.
Those testifying both for and against the bill:
Donna Yule, executive director of the Idaho State Employees Association, said, “With this bill, those of us with incomes of $418,000 or above would see a $1,562 tax cut on average. The average Idaho household, where most of us are, $38,000 to $59,000, would see a $32 decrease in our tax liability – $32.” She noted a recent Boise State University statewide policy survey found little support among Idahoans for further tax cuts. “Most Idahoans feel it is more important to invest in other areas, such as education and infrastructure,” she said.
Elinor Chehey of the League of Women Voters of Idaho said, “These are not tax reductions, they’re tax shifts.” She said while state taxes have been cut $1 billion in the past 10 years, school supplemental levies approved by voters have totaled more than $1.5 billion in the same time period.
John Watts of the Idaho Chamber Alliance, which represents 19 local chambers of commerce in Idaho, spoke in favor of the bill. “Lower income tax rates will position Idaho to be more competitive in regard to our surrounding states and stimulate our economy,” he said.
Miguel Legarreta of the Associated Taxpayers of Idaho said that group calculated that for a typical Idaho family, the bill would mean a 2.5 percent reduction in their state income taxes, or a $77 cut. That’s assuming a family of four with income of just over $82,000 a year. “This tax cut proposal provides moderate relief for the majority of Idahoans and Idaho businesses,” he said.
Idaho’s median household income was $48,920 in 2015, according to U.S. Census data; that ranked 40th among the 50 states.
Moyle said he’s all for funding schools, and considers them his top priority.
“Listen, I support schools as much as anybody in this building, and I think any one of you would probably say the same, we all care about schools,” he said. He said supplemental levies are happening in part because it’s a local choice. “But when we get done … taking care of our schools, there’s still a bunch of money left,” he said. “You could give back to the taxpayers and still meet our commitments to education, which I think is vitally important.”
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