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Record Idaho tax cut clears panel, heads to House for vote

A panel of lawmakers on Tuesday approved the state’s largest-ever tax relief package, voting to send the $600 million tax measure to the full House.

“Every Idahoan benefits from this bill,” said Republican Rep. Mike Moyle. “I want to emphasize that.”

The bill blessed by the The House Revenue and Taxation Committee includes $350 million in rebates for 2020 income tax filers and $250 million in ongoing tax cuts for people and businesses.

The $350 million in rebates will be funded in part by the state’s record $1.9 billion budget surplus. It includes a 12% rebate for 2020 filers on taxes paid in 2019, or $75 per taxpayer and dependent, whichever is greater.

For example, a family of four would qualify for at least $300 in rebate money.

Based on tax rates and the rebate formula, a family of four with an income of $40,000 would get a rebate of roughly $300. A family of four with $60,000 in income would get a rebate of about $470. A family of four with an income of $200,000 would get a rebate of around $1,560.

According to the U.S. Census Bureau, Idaho families in 2019 had a median income of just over $66,000.

The ongoing tax cuts, for individuals, come from cutting the number of tax brackets from five to four and reducing the rate for each of them.

It includes dropping the top rate from 6.5% to 6%. That cut, if the bill becomes law, is retroactive to Jan. 1.

People making more than about $8,000 and couples making more than about $16,000 are in the top tax bracket in Idaho, meaning Idaho income tax is essentially a flat tax with most paying the same rate.

Corporate income taxes under the bill would also be cut from 6.5% to 6%. Backers of that cut said it would keep Idaho competitive with surrounding states in attracting businesses. That cut would also be retroactive to Jan. 1.

Opponents said the tax relief plan for people mostly benefits the wealthy — providing high-earners with the largest share of money from the tax cuts.

“The lopsidedness of this rebate is really tone-deaf,” said Democratic Rep. Lauren Necochea. “Over the last couple of years, we’ve seen income inequality only grow with the pandemic.”

She said the money could be better used by repealing the sales tax on groceries or finding a way to reduce property taxes, which have climbed sharply in many areas as more people move to the state, driving up home prices.

Idaho Republican Gov. Brad Little generally doesn’t comment on pending legislation. But he sent his policy director and his budget chief to testify at the hearing to publicly signal his support.

Policy director Sam Eaton told lawmakers that Little wants Idaho’s taxes to be fair, simple, competitive and predictable.

“The governor believes that House Bill 436 is a strong step in this direction,” Eaton said. “We believe we can provide this record tax relief while also making investments in the governor’s other top priorities, namely education and infrastructure.”

Little’s budget includes a record $300 million from the general fund for education and $200 million ongoing for road maintenance and repair.

Democratic Rep. James Ruchti said the tax-relief bill coming so early in the legislative session could handcuff lawmakers if they eventually decide they want to focus on different types of tax cuts. Property tax relief is a big issue among voters.

“I really do worry that we’re not going to have the money to do everything we have to do,” he said. “My big concern is that right out the gate, we’re making a decision that $600 million is headed this direction, and we’re not going to be able to claw it back once we make that decision.”

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