Education ballot initiative could reverse 2022 tax cuts and raise taxes on all Idahoans
Language in the initiative was written before the state’s most recent tax cuts were approved
Teacher Leah Jones speaks to Reclaim Idaho volunteers and supporters on July 6, 2022, at the Idaho State Capitol. (Clark Corbin/Idaho Capital Sun)
An education funding ballot initiative that will go before Idaho voters in November could have the unintended consequences of reversing the Idaho Legislature’s 2022 tax cuts and increasing taxes for low-income families, state officials said.
The issue involves the Quality Education Act, which organizers from the nonprofit group Reclaim Idaho successfully qualified for the Nov. 8 general election after gathering voters’ signatures across the state. The initiative will likely appear on the ballot as Proposition 1.
Reclaim Idaho organizers intended to raise about $323 million per year for public schools by increasing the corporate income tax rate from 6% to 8% and creating a new 10.925% tax rate for individuals making more than $250,000 per year or married couples making more than $500,000 per year. In an interview with the Idaho Capital Sun on Friday, Reclaim Idaho co-founder Luke Mayville said that is still how the initiative works and he believes language on the initiative, the long ballot title, the funding source statement and fiscal note all make that clear.
Factoring in tax cuts passed by the Idaho Legislature this year
However, a July 14 article from the Tax Foundation, and an email written by the Idaho Attorney General’s Office, suggest passage of the Quality Education Act could raise taxes for all Idahoans who pay income tax, including low-income individuals, and raise more revenue than expected because it does not factor in the tax cut package the Idaho Legislature passed during the opening days of the 2022 session.
Part of the issue is timing.
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Reclaim Idaho organizers drafted the language of their initiative and started circulating petitions for signatures in 2021, before the Legislature’s 2022 tax cuts were proposed or enacted.
As part of a $600 million tax cut and rebate package in House Bill 436 from the 2022 session, the Idaho Legislature reduced the number of income tax brackets from five to four and set the top rate at 6% for a taxable income of $5,000 or more.
“The ballot measure reprints the old, higher rates on incomes below the new threshold, potentially restoring the pre-2022 rates — a tax hike for everyone, not just high earners,” the Tax Foundation article states.
In a July 19 email to Chief Deputy Secretary of State Chad Houck that was obtained by the Sun, Chief Deputy Attorney General Brian Kane wrote that the concerns raised by the Tax Foundation “appear to be largely accurate.”
“The ballot measure uses the 2021 version of the statute as the base language to which it then applies amendments,” Kane wrote. “If the language in the ballot measure were enacted it would disregard all the 2022 legislative amendments that lowered tax rates.”
In a statement of opposition to the Quality Education Act submitted to the Idaho Secretary of State Lawerence Denney on July 20, the Idaho Freedom Foundation argued passage of the initiative would increase taxes by $570 million per year, not $323 million, because of repealing the 2022 tax cuts and a mistake in calculating inflation adjustments.
“Idaho has a $1.3 billon budget surplus; it makes no sense to raise taxes!” the Idaho Freedom Foundation wrote in its statement in opposition to the education initiative.
The Idaho Freedom Foundation’s opposition to the education initiative was expected. In a 2019 opinion piece, the organization’s president Wayne Hoffman argued against public schools, which are a central requirement enshrined in the Idaho Constitution.
“I don’t think the government should be in the education business,” Hoffman wrote.
In a Friday morning interview, Houck said the Secretary of State’s Office is not taking a position on the education initiative, but is choosing to share Kane’s analysis with the public.
But Mayville said he still believes the ballot language reflects the intention of Reclaim Idaho organizers to not raise taxes on anybody making less than $250,000.
“Anyone who reads the petition will see that the document makes it perfectly clear that only annual incomes above $250,000 a year will be impacted,” Mayville told the Sun on Friday. “Only the top tax bracket is underlined in the initiative and so this is the only bracket that will be altered by the initiative.”
Mayville also said a mistake in calculating inflation adjustments that the Tax Foundation and Idaho Freedom Foundation flagged was language that the Idaho Attorney General’s Office originally suggested in a March 26, 2021, certificate of review that was conducted.
On page eight of the review, the Idaho Attorney General’s Office suggested several changes, including defining “adjustment factor” and suggesting language stating that “The adjustment factor is calculated by dividing the consumer price index for the calendar year 2024 by the consumer price index for the calendar year immediately preceding the calendar year to which the adjusted bracket will apply.”
That calculator flipped the numerator and the denominator in the adjustment calculation so that when inflation goes up, the dollar threshold for the tax bracket goes down, Kane wrote.
If the education initiative passes, Mayville said Reclaim Idaho would be happy to work with the Idaho Legislature on an amendment to fix the adjustment calculation.
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What happens next with the K-12 education initiative?
Ultimately voters, the Idaho Legislature and the court system may all have a say in how this all plays out.
Despite the conflicting views on what the effects of passing the education initiative would be, the Quality Education Act will be on the Nov. 8 ballot for Idaho voters to decide.
It would take a simple majority of votes for the education initiative to be approved. If it doesn’t receive a majority of votes, the education initiative would fail.
In his analysis, Kane wrote that the state doesn’t have the ability to correct the language in the education initiative.
“… as we have all agreed, there is nothing that we can do at this point about the ballot language or the text of the initiative,” Kane wrote. “If it passes, it will be up to the legislature to sort it out as it sees fit.”
If voters pass the Quality Education Act in November, legislators will likely play a role in how it is implemented. As with any law, legislators could amend the Quality Education Act or repeal it.
There is precedent for the Idaho Legislature overturning a ballot initiative passed by the voters. In 2002, the Idaho Legislature voted to repeal term limits that 59.4% of Idaho voters approved in 1994, according to the Idaho Secretary of State’s online initiative history page. Legislators then doubled-down on repealing term limits by successfully overriding then-Gov. Dirk Kempthorne’s veto of the bill.
Mayville said Reclaim Idaho would be prepared to take the matter to court to stand up for the education initiative’s original intention.
“If Proposition 1 passes in November and the state misinterprets the initiative, the only final resolution would come from the Idaho Supreme Court, and we are prepared to take the issue to court if necessary,” Mayville said.
Meanwhile, on Saturday, Reclaim Idaho organizers and volunteers announced a get-out-the-vote door knocking campaign in Boise to support the Quality Education Act.
Houck said the Secretary of State’s Office does not have a position on the Quality Education Act and is not issuing a ruling on what passage would or would not mean.
“Our office doesn’t have a position other than that which we have been advised,” Houck told the Sun. “There are a million ways that it could play out. The legislature could do things afterwards. If it did override all the tax cuts, the legislature could turn around and reintroduce the tax cuts and nothing would stop them. There is also precedent in Idaho of the legislature fully repealing a passed ballot initiative.”
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