House approves $253 million tax cut

BOISE — The House voted on party lines Monday to approve a $253 million cut to the personal and corporate income tax rate. This is the first of three tax cut bills proposed that are expected to reduce revenue by a total of $400 million.

Members voted 63-7 to pass HB 40, which would also eliminate the capital gains tax on precious metal bullion and expand an exemption on military pensions to some retired service members who keep working.

The Democrats who debated against it argued the tax cut did not provide much relief for average residents while also significantly cutting future revenue for services like public safety and infrastructure.

House Majority Leader Jason Monks, R-Meridian, argued the state would continue to have funds for necessities because of its robust economy, and that reducing revenue means reducing how much the state can spend.

“We have a sound economy. We can afford this if we choose to do this,” Monks said. “If we don’t, we’ll spend it.”

Debate lasted about 30 minutes, with several Republicans standing up to say they supported it. A couple did not like the capital gains tax elimination but said they’d vote in favor because they supported the income tax cut and military pension exemption.

“This bill reminds me of an old tune, ‘Two Out of Three Ain’t Bad,’ ” Rep. Jack Nelsen, R-Jerome, said. “The third part, the bullion part, is the one that gives me the most heartburn.”

He said that the state should also consider eliminating the capital gains tax on the agricultural industry.

House Assistant Minority Leader Steve Berch, D-Boise, highlighted an analysis by the Idaho Center for Fiscal Policy that determined the middle 20% of Idaho households would see a $127 reduction on the annual taxes on average.

“This bill is not going to provide the kind of tax relief that your constituents are looking for or are going to think that they’re getting,” Berch said. “At the end of the day, you have to be smart and efficient with taxpayer dollars, but you have to balance that with investments for your future, otherwise you will not have what you need for that future.”

A number of lawmakers spoke in favor of the portion of the bill that extends the tax exemption on military pensions to those under age 62 who are employed and making enough money to have to file a federal tax return.

“On the military portion, I’ve studied that in the past,” Rep. Ted Hill, R-Eagle, said. “That particular break actually incentivizes more military to come here and retire.”

House Minority Leader Ilana Rubel, D-Boise, underscored that Gov. Brad Little in his proposed budget set aside $100 million for tax relief, as opposed the total of $400 million being proposed through the three bills introduced this session.

“And that gentleman is not exactly a communist,” Rubel said of the governor. “He is known for being a fiscal conservative, and that is what he had determined we could afford.”

She had concerns that the large reduction may threaten other priorities, such as either eliminating the sales tax on groceries as well as funding basic services.

“This is the one form of tax cut we could do that ensures virtually every penny flows to the wealthiest people in the state. … I don’t think it’s helpful to the people of Idaho at any level of income,” Rubel said. “Even the wealthiest are going to need police and schools to send their kids to.”

Another bill has been introduced this session to raise the grocery tax credit from $120 per person to $155 annually, to offset the sales tax paid on groceries; this bill is expected to reduce revenue by $50 million. The third tax-cut bill would provide a new $50 million toward a small amount of property tax relief and another $50 million of online sales tax revenue toward school bonds and levies.

The income tax cut bill, HB 40, will now head to the Senate.

Guido covers Idaho politics for the Lewiston Tribune, Moscow-Pullman Daily News and Idaho Press of Nampa. She may be contacted at lguido@idahopress.com and can be found on Twitter @EyeOnBoiseGuido.

How they voted

Yes: Kyle Harris-R, Dale Hawkins-R, Lori McCann-R, Brandon Mitchell-R, Heather Scott-R, Charlie Shepherd-R