Big income tax cut clears Idaho Legislature on way to governor’s desk. Will he sign it?

The Idaho Senate voted to send a massive tax cut — described as part of the largest in state history — to Gov. Brad Little’s desk Tuesday, despite concerns from some lawmakers about the bill’s possible impact on the budget.

House Bill 40 is projected to reduce state revenues by $240 million by lowering Idaho’s income tax rate from just under 5.7% to 5.3%. Proponents, including Sen. Doug Ricks, R-Rexburg, as sponsor of the bill, argued that now was the right time to give money back to taxpayers, regardless of financial indicators showing economic uncertainty at the state and federal levels.

“I see continued prosperity for the state of Idaho and I see the income tax as our least-desirable tax,” Sen. Phil Hart, R-Kellog, said Tuesday on the Senate floor. “I think we should continue to chip away at the income tax.”

Little in his annual State of the State address in January to kick off the legislative session proposed a tax cut of $100 million in this year’s budget. But the Legislature’s plans across the three bills call for cuts of more than four times that amount, which could set state lawmakers up for a showdown with Little over the legislation.

Like the House before it, the Senate approved the proposed income tax cut by a margin that could override Little’s possible veto. A two-thirds vote in each chamber is necessary to reject the governor’s decision.

Little last week criticized the total amount of tax cuts proposed this year, saying “we’ve got to be careful.”

“I love the signal that every year in Idaho, your tax burden is going to get less,” Little said at a press conference. “But you’ve got to temper that with all those other things.”

Little’s office declined to comment Tuesday, citing a policy of not discussing bills until the governor has acted on them.

The bill also would expand an income tax exemption on military pensions and remove capital gains and losses on precious metals and monetized bullion when calculating state income taxes, according to its statement of purpose. Combined, those two measures would reduce revenue by $13 million.

‘We should be more conservative,’ Democratic leader says

The Legislature’s move to approve the cut came on the same day that President Donald Trump imposed new tariffs on Mexico, Canada and China. Stock markets fell early in the week and Wall Street’s “fear gauge” picked up, according to the The Wall Street Journal.

“In all that instability, we should be more conservative and think about whether we’re cutting our revenues that hard,” said Senate Minority Leader Melissa Wintrow, D-Boise, in opposition.

Others highlighted concerns, including that state sales tax revenues are down and the Legislature hasn’t set a revenue number yet. Those revenue projections are already down $60 million so far this year, opponents said.

Sen. C. Scott Grow, R-Eagle, co-chairs the influential Joint Finance-Appropriations Committee and voted for the tax cut. He said state projections anticipate $6.4 billion in revenue this year.

The biggest reduction in taxes will go to those paying the most, Grow said. The bill is expected to provide an average of $127 in benefits to working families in Idaho — enough for one cart of groceries, or a few tanks of gas, not more, Wintrow countered. Ricks said a family of four earning up to $137,000 per year would receive about $389 in tax savings.

Families with incomes between $92,000 and $146,000 would see a tax cut of $264, according to a report from the Idaho Center for Fiscal Policy. Between $146,000 and $286,000 could expect annual savings of $456, it reported.

Debate about the tax cut raised questions among senators Tuesday about fiscal conservatism and whether the term means saving for a crisis or returning money back to residents.

Sen. Jim Guthrie, R-McCammon, was one of only a few Republicans to vote against the bill. He said he is for tax cuts, but also believes in “balance and fairness, with an eye on the future.”

“We are in some unique times that carry with them some incredible unknowns,” Guthrie said. “Let’s not spend all our money in one spot.”