BOISE – Idaho House Republican leaders introduced a new tax cut proposal Friday, calling for $169 million in ongoing income tax relief, plus a one-time, $220 million tax rebate.
The House Revenue and Taxation Committee introduced the legislation on a party-line voice vote.
The bill, which is co-sponsored by the entire House Republican leadership team, cuts tax rates in all seven of Idaho’s individual income tax brackets. The top tax rate would drop from 6.925% to 6.5%; the bottom rate would go from 1.125 to 1%.
Revenue and Taxation Chairman Steven Harris, R-Meridian, noted Idaho has condensed tax brackets. The seventh, or highest, bracket kicks in once someone reports at least $7,500 in taxable income.
As a result, “97.3% of all the income tax revenue that (the state) collects comes from that seventh bracket,” he said. “So this (bill) is really a tax break for almost everyone who pays income tax.”
Nevertheless, Rep. Lauren Necochea, D-Boise, pointed out it’s yet another tax proposal that benefits the wealthy more than lower- and middle-class Idahoans.
“I did some calculations last night, and a couple that made $1 million in 2019 would get about $6,000 back,” she said. “A couple making $50,000, which is more typical for Idahoans, would get $100. I think this kind of inequality isn’t what Idahoans are asking us for, in a really tough year economically. And I don’t think this is good for the economy, either. It further exacerbates our income inequality.”
The proposal also reduces the corporate income tax rate from 6.925 to 6.5%.
The one-time rebate portion of the bill essentially drains the sales tax relief fund, which collects sales tax on online purchases.
The fund should have a balance of about $180 million by the end of this fiscal year. The bill also adds $40 million in surplus general fund revenues, creating a rebate pot worth $220 million.
That money would be distributed to full-time Idaho residents who file a 2020 income tax form. The rebate would be equal to 9 percent of their 2019 tax liability, or $50 per taxpayer and their dependents, whichever is greater.
Harris said a family of four would receive a minimum of $200 through the rebate.
The ongoing cost of the proposal is $169 million per year. That’s equivalent to 87 percent of the average annual increase in state general fund collections over the past five years – meaning an average of about $25 million would be left to meet the needs of public schools and other general government functions.
Harris indicated he hopes to bring the bill back to committee Tuesday for a public hearing. Legislative leaders are still hoping to wrap up the session by March 26.
House Republicans introduced a similar bill in February that cut income tax rates, as well as the state sales tax, while eliminating the grocery tax credit. The plan, however, ran into opposition and never got a public hearing.
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