The Idaho Senate approved a $200 million income tax-cut bill Thursday on a 26-9 vote, sending the House-passed measure to the governor’s desk.
“It’s been five years since we’ve had significant tax relief in the state of Idaho,” Sen. Brent Hill, R-Rexburg, told the Senate.
Hill said the measure will result in larger families in Idaho paying more in income taxes, but he said many large families also own small businesses, and a business break contained in the bill will help them.
Sen. Steve Vick, R-Dalton Gardens, told the Senate, “If I had crafted a bill, this is probably not exactly the tax bill I would have crafted. It was a very difficult decision for me to make. … But it’s a pretty good bill.”
Businesses and higher-income earners will get the biggest breaks under the bill.
“That’s where the money is coming from,” said Senate Majority Leader Chuck Winder, R-Boise. “I think it’s a good one to let us go home on.”
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.”
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.
Three Senate Republicans – the current and former Senate tax chairs and the current Senate budget committee chair – joined all six minority Democrats in voting against the bill.
“I have not had one letter from my district asking me for this bill,” Sen. Shawn Keough, R-Sandpoint, co-chair of the Legislature’s joint budget committee, said after the vote. “I have had many letters asking me for consideration for the child tax credit beyond what’s proposed here.”
Consistently, she said, for the last 22 years, she’s been hearing calls from her constituents to remove Idaho’s 6 percent sales tax from groceries.
“And the last few years, the biggest message of all has been they want the Legislature to live up to its constitutional mandate to thoroughly fund schools, and not rely on supplemental levies, which are misnamed,” said Keough, who is retiring after her current term. “We could’ve done better.”
Sen. Jeff Siddoway, R-Terreton, the former Senate tax chairman, said he found it “disturbing” that lawmakers had little role in crafting the bill, which was proposed by Gov. Butch Otter. “I believe in this Legislature,” Siddoway said. “Had all of us had the opportunity to be active in the process, we would have come up with a much different, much better bill.”
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