The Idaho House Revenue and Taxation Committee voted Jan. 25 to bring the state’s tax code in line with federal rules, a move that’s estimated to cost Idaho roughly $46 million over two years.
Lawmakers usually prefer to sync the state’s tax code with the federal version to make it easier for residents and businesses to do their taxes or avoid having to keep separate accounting books to track the different rules. It’s an annual request made by the tax commission at the beginning of Idaho’s legislative session to ensure Idaho’s definition of adjusted gross income matches the Internal Revenue Code.
By syncing up the codes — and incorporating federal tax breaks into Idaho’s code — the state would lose out on millions of dollars in uncollected taxes.
The largest chunk of lost revenue would come from a newly approved $500,000 annual deduction for small companies buying equipment. Doing so now allows small businesses to deduct upfront rather than depreciate over a number of years the cost of equipment like computers, vehicles, manufacturing and farm machinery and office furniture.
The deduction is estimated to cost Idaho more than $13 million this year alone and another $22 million for fiscal 2017, which starts in July.
Several committee members doubted the bill’s accounting, while others objected to a provision removing a requirement for same-sex couples to file separate state tax returns.
“I just don’t see where you’re coming from with this huge number,” said House Majority Leader Mike Moyle of Star, a member of the Revenue and Taxation panel. Moyle said that the cost is off because the farmer who deducts a new tractor this year will end up paying more in taxes in the future because he won’t be able to offset the deduction on that piece of equipment.
“There is no intention to hide money,” said Ken Roberts, chairman of the Idaho Tax Commission. “We believe this is an accurate fiscal impact.”
Roberts added that not conforming would create a confusing tax system and cause budgeting challenges.
Roberts also said that Idaho’s growing economy shows that people are likely to buy new equipment in future years, not just all at once.
Meanwhile, Republican Reps. Heather Scott of Blanchard, Ron Nate of Rexburg and Greg Chaney of Caldwell voted against the bill because of the provision for same-sex couples filing.
In 2014, Idaho lawmakers approved requiring same-sex married couples who filed joint federal returns to recalculate their federal taxes as singles before filing their state returns. Since then, Idaho’s same-sex marriage ban was invalidated by the U.S. Supreme Court.
“If we want to pass this part of the bill, then we need to make a change to our state Constitution,” Scott said, speaking to the state’s now unenforceable gay marriage ban still in the Idaho Constitution.