Idaho House Republicans passed a massive income tax cut Wednesday despite worries that it could put $1.8 billion of federal COVID relief money in jeopardy.
The bill would cut state income tax rates across the board and give residents a rebate if they’ve paid income taxes the last two years. The price tag is nearly $390 million, with $169.4 million of it being ongoing costs.
“This is your money that you paid in that we’re trying to give back in the fairest way possible that we can determine,” said Rep. Steven Harris (R-Meridian), who sponsors the bill.
Idaho’s top personal tax rate, which includes everyone making more than $11,760, would be cut from 6.925% to 6.5%, as would corporate income taxes.
The rebate would be based off of a person’s 2019 tax filing. They’d get a $50 minimum per person and dependent or an amount equal to 9% of state tax they paid that year, whichever is greater.
The latest federal COVID relief package passed by Congress this month sets aside $1.8 billion for the state, local governments and capital projects, but the legislation said states can’t directly or indirectly use these funds to backfill holes left by tax cuts.
Much of the money for the tax cut would come from a special fund bankrolled by sales tax collected from online purchases, though millions would still come from the general fund.
Still, Rep. Greg Chaney (R-Caldwell) doesn’t think the bill would violate federal law.
“But if that is the decision of the United States Department of Treasury, then game on,” Chaney said.
He says it would be a great test case to take to the U.S. Supreme Court in the fight against “fiscal federalism,” which Chaney defines as “the practice of making strings on federal money to make us dance as directed.”
Democrats, like House Minority Leader Ilana Rubel (D-Boise), point out that the rich will benefit more from this plan than low-income people.
“This is not the time to do a giant giveaway to the wealthiest people in society and jeopardize the services for the people at the bottom who need it the most while giving them nothing – crumbs from the table,” Rubel said.
There’s no cap on how much the 9% rebate could be applied to.
Rep. Steve Berch (D-Boise) said the bill “demonstrates zero investment” in the services the state should be providing to the public.
“It denies money that could be spent on education so we don’t have to have school bonds and levies every single year,” Berch said.
The bill still needs Senate approval before going to the governor’s desk for his signature.
Copyright 2021 Boise State Public Radio
Member support is what makes local COVID-19 reporting possible. Support this coverage here.
