Majority leader: poll on Idaho taxes ‘a misnomer’

Most Idahoans are happy with the state’s existing  tax system and feel issues such as education are more pressing, but  according to one legislator, that opinion is a “misnomer.”

The Idaho House of Representatives voted 53 to 13 in favor of  a bill to reduce the top two income tax brackets by a tenth of a percent. The bill is sponsored by Idaho House Majority Leader Rep. Mike Moyle, R-Star.

The vote on the bill comes just a few months after the results of a statewide poll commissioned by the Associated Taxpayers of Idaho and conducted by American Strategies of Washington, D.C. The poll showed 70 percent of  the 603 registered voters believed the current system is either fair or very fair. Only 4 percent called changing the tax system a priority.

“I think there is a misnomer,” Moyle said. “If you listen to some of the people, they say Idaho is right where it needs to be, that we are not overtaxed and that we are competitive with surrounding states. I don’t believe that’s true.”

Public testimony allowed on the bill by the House Revenue and Taxation Committee Feb. 1 returned mixed results. Citizens pointed out Idaho’s income tax is higher than most of its neighbors, but also said a decrease in state funding would hurt

programs that are already under-funded, such as transportation and education.

“The Chambers for years have said that one of the limiting factors when businesses come to Idaho is they look at what our tax rate is. They don’t look at all of our incentives,” Moyle said, speaking for the Chamber of Commerce organizations around the state. “They see our income tax rate is 7.4 percent and it has a way of turning them around at the door.”

To compare, Wyoming, Nevada and Washington have no income tax, Colorado has a tax rate of 4.6 percent, Utah’s is set at 5 percent and Montana’s is set at 6.9 percent, Moyle said.

California and Oregon both have income tax rates higher than Idaho’s.

Everyone in Idaho who makes above $7,260 now pays the two highest income tax rates, 7.1 percent and 7.4 percent. Moyle’s bill would reduce each tax rate by a tenth of a percent, costing the state about $27.8 million in revenue, while providing a little relief to most taxpaying Idahoans.

“Our analysis on the impact of this bill is that the proposed tax reduction at the top of the marginal brackets will lover the income tax burden of 331,000 filers with taxable income in Idaho,”  said Ben Davenport of Associated Taxpayers of Idaho. “We’re talking about a total of 76 percent of the filers with a taxable income here.”

Not everyone is excited about the savings.

“As you are all aware, the Idaho Legislature has been cutting taxes through the last couple decades and in fact it even cut taxes through the great recession,” said Donna Yule, executive director of the Idaho Public Employees Association. “When Rep. Moyle introduced this bill, he said that since revenues were up we should give some of that back to taxpayers.”

Yule calculated how much the tax cut would save her: $23 a year. She said she’d rather see that $23  spent on the education of her grandchildren and on repairing Idaho’s bridges and highways.

“Even with increased funds directed at education, we still haven’t returned to pre-2009 levels of funding and even with increased gas taxes and registration fees passed last year, we are still millions of dollars behind in the maintenance of our public infrastructure,” Yule said.

With decreased funding, more and more school districts have turned to tax levies for funding, said Elinor Chehey of the League of

Women Voters. In 2004 there were 52 districts with supplemental levies and in 2016 there are 95 districts.

“If this committee is going to decide to make income tax reductions even in the face of public education funding issues and higher education funding issues, then I have to say I am a little disappointed in where we placed our priorities,” said Rep. Mat Erpelding, D-Boise. “A person who makes what  I make will see close to $30 dollars in tax relief here and yet the kids I am going to have at some point will see increasing tuition and underfunded schools across the board.”

In the House chambers, three Republicans voted against the bill and all but one Democrat voted against it. Rep. Dan Rudolph, D-Lewiston, said he wasn’t against the idea of tax cuts, but hadn’t seen data to illustrate how income tax rates affect business.

“I know this is taxes and business and not necessarily biology, but in biology if you know you have an unhealthy environment, and that seems to be the underlying theme here, you will see an increased death rate,” Rudolph said. “I don’t see that here with our businesses. You would also see a decreased birth rate, but I don’t see that here.”

Moyle invited the Idaho Chamber Alliance to testify about businesses it has seen choose other states. He said he understood concerns about the tax cut proposal.

The bill now goes before the Senate Local Government and Taxation Committee. If it passes, the bill will also extend the state’s grocery tax credit by $10.

“I want to be completely clear,” Moyle said. “Over the last two years we’ve seen priority investments in education at massive levels as well as transportation and health and welfare. The only people who have been left out the last two years are the tax payers.”