UPDATE: Gov. Brad Little signed House Bill 40 into law on Thursday, March 6.
“Idaho families and businesses need and deserve to keep more of their hard earned money. It is the right thing to do. Idaho’s continued strength comes from our focus on good government and the Idaho taxpayer. I appreciate my partners in the Legislature for sharing our goal of prioritizing tax relief while taking care of the needs of a growing state. As we continue to deliver historic tax relief, we must ensure our budget balances as the Idaho Constitution requires,” Little wrote in a news release.
ORIGINAL STORY: Idaho senators signed off on a $253 million income tax cut Tuesday in the face of falling state tax collections.
House Bill 40 would cut Idaho’s personal and corporate income tax rates from 5.695% to 5.3%, along with other benefits for retired veterans and those who purchase gold and silver.
The Idaho Division of Financial Management released preliminary tax collection data for February, which show declining revenue for a second month in a row.
Year-to-date collections are down about $57 million from projections, including a 3.4% dip in sales tax revenue.
Sen. Joshua Kohl (R-Twin Falls) said if there is a recession, lawmakers should cut their way through the budget to make up the difference instead of holding off on these tax cuts.
“If there is hard economic times coming for the people of Idaho, the best thing this body can do is cut as many taxes and fees for them as possible,” Kohl said.
Sen. Kevin Cook (R-Idaho Falls) ultimately supported the bill.
But he said lawmakers should not be making significant budget decisions before the legislature has agreed upon a revenue figure for the upcoming fiscal year.
Cook said legislators are treating the annual practice as an afterthought.
“Kind of like it’s a thorn in our side. It’s something that kind of bugs us. It’s become a formality rather than a fiscal priority,” he said.
Joint Finance and Appropriations Committee (JFAC) co-chair, Sen. Scott Grow (R-Eagle), said he expects JFAC to set a roughly $6.4 billion revenue target Wednesday, though he said that wasn’t a guarantee.
In January, the committee rejected two proposals related to revenue projections, shelving the issue while it set budgets.
Aside from the lack of an approved revenue target, the eight state senators who opposed the bill pointed to economic uncertainty coming from the federal government.
Specifically, they cited the Trump administration firing tens of thousands of federal workers and imposing tariffs on Canada, China and Mexico, which went into effect Tuesday.
Grow said the effects from these actions are temporary.
“Sure, [the tariffs are] having a hit right now. I would expect them to have a hit right now, but right now isn’t 18 months from now,” he said.
House lawmakers passed the legislation last month.
The bill surpasses Gov. Brad Little’s proposed $100 million for tax cuts by more than 250%.
Last week, Little told reporters Idahoans should expect an “economic shock” due to the Trump administration’s significant layoffs and ongoing governmental reconstruction.
The governor will have until next week to decide whether to sign the bill, let it go into law without his signature, or veto it.
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