What is billed as one of the largest tax reduction bills in Idaho’s history is expected to be signed by Gov. C.L. “Butch” Otter.
Senate members on March 1 approved the measure on a 26-9 vote, with just three Republican lawmakers voting with the Senate’s six Democrats in opposition.
“We have to believe it’s good for our families, we have to believe it’s good for Idaho,” said Senate President Pro Tem Brent Hill, a Republican from Rexburg.
The plan is two pronged.
The first part aligns Idaho’s income tax code to recent federal changes in the tax overhaul signed by President Donald Trump. State officials have estimated that the federal tax changes will result in Idaho taxpayers paying roughly $100 million more next year. While Idaho has the option to not conform, lawmakers typically conform to the federal tax code to prevent citizens from extra bookkeeping.
That’s when the second part of the proposal becomes crucial. To offset the $100 million conformity price tag, HB 463 calls for reducing all seven of Idaho’s brackets for personal income tax rates and corporate tax rates by 0.475 percent. It also creates an Idaho child tax credit.
Changing the state’s tax brackets would lower Idaho’s $3.5 billion general fund by $159.6 million while implementing the child tax credit would slash the fund by an additional $42.3 million — totaling nearly $200 million.
Democratic lawmakers and a handful of Republicans have criticized the proposal because larger families are expected to have a higher tax burden if the bill is enacted.
Under the federal tax overhaul, personal exemption for dependents was removed and the federal child tax credit was doubled from $1,000 to $2,000. However, Idaho’s code doesn’t currently have an Idaho child tax credit.
The measure passed March 1 adds a $130 child tax credit — an amount that many say isn’t enough.
“If you want to call this bill a tax cut, you can, but that’s not what’s really happening,” said Sen. Grant Burgoyne, a Democrat from Boise. “Put another way, if your 3-year-old takes scissors to her bangs, you don’t call it a haircut.”
A recent analysis by the nonpartisan Idaho Center for Fiscal Policy reported that families who have three or more children earning between $39,000 and $63,000 a year would pay on average roughly $3,000 in taxes.
“I speak for the children, I speak for Idaho families and I speak for the businesses who understand the need for highly skilled workers, we still have work to do,” said Sen. Janie Ward-Engelking, a Democrat from Boise. “We’re still recovering from the recession. This is simply too much too soon.”
After all 59 Republicans in House approved HB 463 earlier this year, the Senate passed the measure with just GOP Sens. Jeff Siddoway, Shawn Keough and Dan Johnson voting with the Senate’s six Democrats in opposition.
Siddoway, former chairman of the Senate’s tax committee, Keough, co-chair of the state’s powerful budget setting committee, are not running for re-election.
State lawmakers are feeling pressure to pass a tax cut bill not only because of the pending May primary election, but also because a substantive tax cut plan hasn’t been enacted in Idaho since 2013.