A new analysis of the most recent income tax relief passed by state lawmakers shows the legislation disproportionately benefits high-income earners.
This year’s House Bill 40 lowered income taxes for all Idahoans. The nonprofit Idaho Fiscal Policy Center’s latest report says the tax system is still regressive.
“Those with lower incomes pay a higher share of their income to taxes than those with very high incomes,” explained May Roberts, an analyst from the center.
For example, people who make $31,000 dollars a year pay 9% income taxes, while those who make above $739,300 annually pay 2% less.
“The very, very high income earners, at the top 1%, only pay 7% of their income on taxes,” Roberts said.
The Center says the $377 million statewide tax cut will shift more of the tax burden to middle-income families, “giving a greater share of income tax cut benefits to the wealthiest households.”
“This bill cut the income tax rate from 5.695 to 5.3 percent, resulting in the top 20 percent of households – those with incomes of $146,700 and above – receiving 66 percent of the overall benefits,” the report says. “The top one percent of income earners will receive an average income tax cut of $5,358, while families earning a median income will receive an annual tax cut of approximately $127.”
This year, lawmakers also passed House Bill 231, increasing the state’s grocery tax credit. Roberts said for middle income families, that won’t be enough to counter the loss of the Child Tax Credit, which lawmakers did not renew and will expire at the end of the year.
“Lawmakers need to take action to ensure low to middle income families aren't paying more than their share of state taxes, and they can balance out the tax code by renewing the child tax credit in the next legislative session,” Roberts recommended.
The report says most households will owe less in 2026 - except households with children making between 55,000 and 91,000 dollars annually. The Fiscal Policy Center predicts the middle income group will owe about $100 more next year.
