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Income tax cut clears a Senate committee over Democrats' objections

The state flag of Idaho hanging from the dome inside the Capitol building.
James Dawson
Boise State Public Radio

Republican lawmakers in an Idaho Senate committee overwhelmingly supported a massive income tax cut and rebate plan Thursday, leaving one legislative hoop to jump through.

Introduced earlier this month, the historic plan would shave Idaho’s top personal and corporate income tax rates from 6.5% to 6%. That bracket includes anyone earning more than $5,000 annually.

Taxpayers would also see another one-time rebate based on how much they paid the state last year or $75 per person, whichever is greater.

The proposal would cost Idahoans $600 million in its first year, scaling up to more than $1.5 billion over four years.

“I’ve always thought Idaho’s taxes were high and that’s even before I started comparing our taxes to other states,” said Sen. Doug Ricks (R-Rexburg).

Four of Idaho’s six neighboring states have lower rates for their top personal income tax brackets. Nevada, Washington and Wyoming have no state income tax at all.

Lobbyists for pro-business groups in the state strongly backed the bill, saying it would benefit workers and companies alike. Republican senators agreed.

“Small business in the last two years has struggled mightily,” said Sen. Mary Souza (R-Coeur d’Alene). “So, what income they do have, getting a tax break on that will help.”

Individuals testifying disagreed, though, mirroring talking points Democratic lawmakers have been making for weeks.

“Once you lower our property taxes, [allow] low-income seniors to stay in their homes, eliminate the regressive tax on groceries, pay our teachers what they’re worth and make my frequent drives to North Idaho safe, then you can pass this bill for those who need it the least,” said Carol Richel, a Democratic Party leader from Eagle.

Democratic lawmakers held a press conference prior to the hearing blasting the bill that they say would only enrich the wealthiest state residents and leave little for those who earn less.

The proposal backed by GOP leadership and Gov. Brad Little “absolutely does not get it right,” according to House Minority Leader Ilana Rubel (D-Boise).

“We don’t get to spend $600 million again, or at least we don’t get to take that kind of revenue reduction again while still having any hope of funding infrastructure and schools and all the other things we want to target,” Rubel said.

Instead, Idaho Democrats, who make up about 20% of legislative seats in the state, floated a multi-pronged plan adding up to the same $600 million target.

The largest ongoing expense would eliminate the state’s tax on groceries, costing $196 million annually. Right now, most state residents earn a $100 credit per person to help offset that tax.

Public school districts would receive a one-time boost of $250 million under the plan to cover outstanding bond and levy payments.

Such a move “gives immediate relief to your property taxes,” said Senate Minority Leader Michelle Stennett (D-Ketchum), since both school bonds and supplemental levies are paid through local property taxes.

The money would be proportionally divvied up among districts under the proposal. Districts without bonds or levies – or those who have residual money left over – could use the money for other infrastructure or educational needs.

Other facets of the Democrats’ plan include doubling the property tax assistance program for seniors, increasing the homeowner’s exemption and tying it to inflation and funding EMS services for rural areas.

Those efforts are unlikely to even get a hearing. Rubel said GOP leaders “shot down” each of these proposals.

Gov. Brad Little has already signaled his support for the Republican-backed bill should it pass the full Senate.

Follow James Dawson on Twitter @RadioDawson for more local news.

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I cover politics and a bit of everything else for Boise State Public Radio. Outside of public meetings, you can find me fly fishing, making cool things out of leather or watching the Seattle Mariners' latest rebuilding season. If you have a tip, please get in touch!