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Regional News

Idaho House approves state income tax rebate

Idaho Statehouse
Courtesy of the State of Idaho
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Sponsors of a proposed income tax rebate in Idaho are quickly moving it through the legislative process.

The bill is one of several proposals for sending some of the state's budget surplus back to taxpayers.

The Idaho House of Representatives has approved a state income tax rebate bill as legislators look to return some of the Gem State’s projected $1.9 billion budget surplus to taxpayers.

The 57-13 vote came after more than an hour of debate. That debate was focused, in part, on what was the most appropriate means for giving tax relief.

The bill would provide $350 million in one-time rebate checks, with the amount determined by how much state income tax people paid in 2020. Even those who didn’t pay any tax would receive at least $75. Others could receive as much as 12% of what they paid.

The bill would also permanently reduce the number of personal income tax brackets from five to four and lower the rates to 1%, 3%, 4.5% and 6% and make the changes retroactive to January 1, 2022. The bill would also lower the corporate income tax to 6% retroactive to January 1, 2022.

The bill’s sponsors, House Majority Leader Mike Moyle and Rep. Steven Harris [R-Meridian], say that would save taxpayers an additional $250 million. Moyle argues that the reduction in corporate tax rates is an economic development tool that will make Idaho more competitive in attracting and retaining businesses.

The income tax rebate proposal is the first salvo in what could be a robust debate about how to return part of that state surplus to taxpayers. Its sponsors argue there’s still plenty left and that Idaho can afford a reduction or elimination of the state grocery tax, as some are advocating. But Rep. Ilana Rubel [D-Boise] doesn’t buy that. She says if the legislature approves the income tax rebate, it will reduce the desire to act on the grocery tax. She believes reducing or eliminating the food tax will have a greater benefit for low and middle-income families.

Though all but one Republican voted for the proposal, some in the GOP also questioned the need for an income tax windfall. It’s the second consecutive year the legislature voted to issue income tax rebate checks. Some said their constituents are more interested in a grocery tax repeal or a reduction in property taxes. Rep. Tammy Nichols [R-Middleton] said during a hearing on Tuesday that no one has contacted her advocating for income tax relief. Nonetheless, she voted for the bill on Thursday, as did every other Republican but one.

As for reducing property taxes, Moyle argued on the House floor that the state cannot reduce its property tax because it does not assess one. That’s done by local entities.

The income tax rebate bill now heads to the Senate. It has the support of Governor Brad Little.