Idaho House passes $600 million income tax cut and tax rebate bill
House Bill 436 heads next to the Senate for consideration
Legislators work from the House chamber at the Idaho Capitol on Jan. 17, 2022. (Otto Kitsinger for Idaho Capital Sun)
The Idaho House of Representatives voted nearly along party lines to pass the largest tax cut in state history on Thursday, a $600 million package to reduce income and corporate tax rates and provide income tax rebates.
The House voted 57-13 to pass House Bill 436. It was the first bill of the year House members called to the floor for a vote, and it was punctuated by a 90-minute debate.
Rep. Fred Wood, R-Burley, was the only Republican to join the chamber’s 12 Democrats in opposing the bill.
Gov. Brad Little outlined the tax cuts in his Jan. 10 State of the State address and Republicans steered the bill through a committee hearing earlier this week and Thursday’s floor vote.
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Little and House Republicans said the bill is the largest tax cut in state history, based on dollars. Idaho’s projected $1.9 billion surplus, they argued, puts the state in a once-in-a-lifetime position to return a huge chunk of tax dollars to Idahoans and still make $500 million in proposed investments in education and transportation.
“It gets money back out to Idahoans soon, like right away,” House Majority Leader Mike Moyle, R-Star, said in debate. “The sooner we pass this, the sooner they can start sending the money out.”
Moyle, one of the bill’s co-sponsors, also predicted the ongoing cost of the bill ($251 million annually) would be less than the ongoing increase for K-12 schools (Little proposed a $300 increase for 2023, but legislators have yet to set the state budget).
“Frankly, this is one of my favorite tax bills ever,” Rep. Jason Monks, R-Meridian, said. “(It’s one of my) favorite tax bills that we’ve ever done since I’ve been here because it’s $600 million back to the people.”
Despite near unanimous support within the Republican ranks, several GOP legislators pointed out in floor debate that the bill does not address property tax rates or the sales tax charged on groceries.
Rep. Tammy Nichols, a Middleton Republican and one of the more conservative members of the House, said the bill was not her favorite, but she voted for it because it was a tax cut and she hoped to do more later.
On the other hand, Democrats blasted the bills as an irresponsible misuse of the state’s projected surplus and revenues.
House Minority Leader Ilana Rubel, D-Boise, said the bill saddened her and said its passage will make it much harder to address property taxes or grocery taxes. She also said the state’s surplus is misleading and only exists because of what she called under-investment in state programs such as education for a decade or longer. She said the state should have prioritized investments in education, housing, road and bridge repairs, child care, emergency medical services and other areas ahead of income tax cuts.
“This came in before almost any committee had gaveled into session,” Rubel said in floor debate. “There hasn’t been a penny put into education yet this session. There hasn’t been a penny put into infrastructure. We have solved no problems as we sit here today. Absolutely nothing. Anything is just aspirational that maybe if there is leftover money after this giant $600 million tax cut maybe then we’ll get around to the schools.”
In breaking ranks with Republicans, Wood said the bill commits to spending a huge chunk of the state’s projected surplus before the fiscal year is over and the money is even in the bank.
“The fact is that we live in the fastest growing state in the United States, or if not awful close to it,” Wood said during floor debate. “And a lot of that surplus is because of that growth and we’re not taking that money and plowing it back into the infrastructure, one-time expenditures, to support that population. And what we are about to do is cut the revenue stream that is going to allow us to do that into the future. And, Mr. Speaker, this kind of reminds me or smells a little bit like the way Congress operates and not the way the Idaho Legislature has operated that last 15 years that I’ve been here.”
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What taxes are being cut and what do the cuts cost?
The bill does several things.
- It reduces the number of individual income tax brackets from five to four (see table below this article for breakdown).
- It sets the rate at 6% for the top individual income tax bracket, which would apply to Idahoans with a taxable income of $5,000 or more.
- It reduced the corporate income tax rate from 6.5% to 6%.
- It provides $350 million in income tax rebates this year. The rebates would be for 12% of an individual’s 2020 Idaho personal income tax return, or $75 for each taxpayer and dependent, whichever amount is greater. For a family of four, that means the rebate would be at least $300.
The $600 million tax cut package includes one-time and annual expenses.
- The income tax rebates would cost $350 million and go out to Idaho taxpayers in 2022. Funding for rebates would come from the state’s projected $1.9 billion surplus.
- Reducing individual and corporate income tax rates would cost $251 million annually, starting in 2023. From that total, $94 million would come from the state’s tax relief fund, which is funded by sales tax collected from online purchases. The remaining $157 million would come out of the state’s general fund.
House Bill 436 heads next to the Idaho Senate for consideration. The bill includes an emergency clause which would make it retroactive to Jan. 1 if it passes the Senate and is signed into law by Little.
Under $1,000 in taxable income: 1%. $1,000 to $3,000: $10, plus 3% of the amount over $1,000. $3,000 to $5,000: $70 plus 4.5% of the amount over $3,000. $5,000 and above: $160, plus 6% of the amount over $5,000.
Idaho’s new individual tax rates under House Bill 436
Under $1,000 in taxable income: 1%.
$1,000 to $3,000: $10, plus 3% of the amount over $1,000.
$3,000 to $5,000: $70 plus 4.5% of the amount over $3,000.
$5,000 and above: $160, plus 6% of the amount over $5,000.
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