The centerpiece tax bill of the 2018 session is headed to the House floor.
Voting along party lines, the House Revenue and Taxation Committee approved a far-reaching bill that would cut Idaho taxes by $104.5 million.
House Bill 463 has some high-powered backing, from Gov. Butch Otter and the Legislature’s top four ranking Republicans. It also has timing on its side; the bill aligns Idaho tax code with the newly adopted federal tax overhaul, and the state historically syncs its tax code with federal code, so families and businesses need only keep one set of books.
But this time around, tax code conformity carries a steep price tag, as Idahoans will wind up sending an additional $97.4 million a year to Uncle Sam. To offset this — and provide a $104.5 million tax cut — House Bill 463 cuts corporate and income tax rates across the board, and a tax credit of $130 per child.
The net result, said House Majority Leader Mike Moyle, R-Star, is perhaps the largest tax cut in Idaho history. And, he said, the bill represents an incremental step to reduce income tax rates while meeting Idaho’s commitments to education.
“I think it’s a long-term proposal, a little at a time,” Moyle said.
If passed, HB 463 would move Idaho’s corporate and top-end individual income tax rates from 7.4 percent to 6.925 percent. Other individual income tax rates would decrease by .475 percent.
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Getting the corporate income tax rate below the 7 percent mark would bring Idaho’s rate closer to neighboring states, said John Watts of the Idaho Chamber Alliance, which represents 22 chambers of commerce across the state. “It gives us a competitive opportunity.”
Supporters and opponents alike pointed out that the state has other tax cut options — namely the idea of eliminating the sales tax on groceries. Rep. Ron Nate supported HB 463 in committee — after urging committee Chairman Gary Collins to schedule a hearing for Nate’s grocery tax bill. Collins was noncommittal.
The grocery tax repeal remains a sensitive issue around the Statehouse — and a popular notion with many Idahoans. Lawmakers passed a grocery tax repeal last year, but Otter vetoed the bill and the Idaho Supreme Court kept the tax on the books. Otter remains opposed to a grocery tax repeal. But in a recent Boise State University survey, 59 percent of respondents said they preferred a grocery tax repeal to an income tax cut.
Reps. Mat Erpelding and John Gannon, both D-Boise, argued against the bill. Erpelding reminded the committee that Idaho college tuition increases have outpaced income growth, leaving graduates in debt. Gannon said the tax cut would leave the state fewer dollars to address teacher shortages, leaving schools reliant on supplemental property tax levies.
With Monday’s vote, HB 463 heads to the House floor, for a possible vote later this week.