Income tax cut bill goes to Idaho House

BOISE — What may be the biggest ongoing cut to Idaho income taxes has advanced to the House floor.

The House Revenue and Taxation Committee on Thursday voted on party lines to send HB 40 to the floor, with the Democrats arguing that it will only benefit the wealthiest residents and that the committee should pause a vote to ensure the state has enough revenue to meet its other obligations — including other proposed tax cuts.

It was also noted that the budget-writing committee has not yet set a revenue projection from which to set the budget against.

“I think it’s important to remember that if we don’t give it back, we’ll spend it, and I would rather give it back and grow the economy,” House Speaker Mike Moyle, R-Star, told the committee Thursday.

The bill would reduce the state’s general fund revenue by an estimated $253 million by reducing the individual and corporate income tax rate to 5.3%, eliminating the capital gains tax on metal bullion, and exempting more military pensions for those younger than age 62 if they are employed.

Two remote testifiers who submitted emails wrote that they backed the bill especially because of the tax exemption expansion on military pension. The one testifier in opposition also wrote that he supported the military pension section but thought it should be separate from the reduction and capital gains elimination, which he opposed.

The Idaho Center for Fiscal Policy in a report analyzing the impact of HB 40 determined that for households earning between $55,600 and $91,8000 — representing the middle 20% of Idaho income groups — would see a reduction of $127 on average per household.

Those making between $31,100 and $55,600 would see around $64 reduced on average. The largest share of benefit would go to households making between $146,000 and $286,000, according to the report, at a $456 average reduction.

The report also cites an estimation from the Institute on Taxation and Economic Policy that predicts the income tax reduction alone would cost the state $258 million.

Fred Birnbaum of the Idaho Freedom Foundation, a conservative think tank, spoke in support of the bill and argued that the economic benefit from tax cuts will offset the reduction in revenue.

The one email testimony in opposition questioned who the capital gains elimination on precious metal bullion would benefit.

Moyle said in his presentation of the bill of metal bullion capital gains, “we all know that nobody’s paying taxes on that anyway, we can’t track it.”

Net gains and losses on precious metal bullion are taxed at the federal level.

House Assistant Minority Leader Steve Berch, D-Boise, made a motion to hold the bill in committee subject to the call of the chairpersons so that members could return to the issue before voting.

“I don’t think it’s prudent to move forward with this bill at this time,” Berch said. “I believe it’s premature to pass what’s been called possibly the largest tax cut in history in the state of Idaho, until we have more information to make a fully informed decision. This bill cannot be viewed in isolation, it is part of a broader mosaic.”

He highlighted other bills the Legislature will consider this year, including a proposed increase in the grocery sales tax credit and a bill to put $50 million toward property tax relief.

Berch’s motion to hold the bill failed in a voice vote.

Majority Leader Jason Monks, R-Meridian, said that he thought the Legislature was “late getting this done,” and he would have rather seen it the first week of session. He also said that spurring growth was how the state would continue to pay for what is needed.

“The only way we’re going to have more money for infrastructure is to have a robust economy,” Monks said.

Rep. Charlie Shepherd, R-Pollock, said he was in favor of taking revenue off the table before proposals to spend more.

“If we cut taxes first and foremost right at the top, it’s pretty hard for government to grow and government spending to grow if there’s no money to use,” Shepherd said.

The bill goes to the House for a vote by the full chamber.

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.