The Idaho Senate has followed the House lead in approving a state income tax rebate bill. The 27-7 party line vote on Tuesday came after an hour-long debate in which several senators declared the proposal not perfect but a good way to return some of the Gem State’s projected $1.9 billion budget surplus to taxpayers.
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. It would also permanently reduce the number of personal income tax brackets from five to four, 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.
“It does things that I support, lowering taxes, reducing the number of brackets, simplifying our tax code. I also like the fact that there’s a minimum rebate,” said Sen. Steve Vick [R-Dalton Gardens] during floor debate.
That minimum is $75 for people who pay little or no state income tax. Others could receive as much as 12% of what they paid.
Opponents, such as Sen. David Nelson [D-Moscow], say they agree with the need for some form of tax relief, buy they argue cutting income taxes unfairly benefits wealthier Idahoans. They say the state should first look to cutting property taxes and-or eliminating the state tax on food.
“I have yet to have a citizen ask me for an income tax cut and I have been bringing it up in town halls and forums,” Nelson said, in a refrain that has become common during the course of the debate on this bill. “I get property tax relief all the time, especially locally.”
Nelson and other Democrats argue the legislature should leave enough after tax cuts to increase funding for other priorities. They argue the state should spend far more for schools and for better pay for law enforcement officers.
“If we send more money down to the schools, we can reduce their supplemental levies, which are on most of my constituents’ property tax bills, the single biggest element there,” Nelson said.
Others objected to the timing of the tax rebate, before other tax proposals have been debated and before the major spending decisions will be made. Sen. Peter Riggs [R-Post Falls] disagreed.
“We have to look at not what is the best plan for the future of the people of Idaho, but what are the opportunities that we can seize when they are in front of us,” he said. “This is not, as we have seen, a perfect bill that solves all issues for all concerned parties, but it is a good bill that will provide financial relief.”
And, says Vick, it will also take a good chunk of money off the table for people who might be tempted to spend it.
“It’s been stated that this permanently, or until we change it, removes revenue from state government. I think that’s a good thing,” he said. “If you believe in limited government, then one way to limit the size of government is to limit their resources.”
The income tax rebate bill has now been approved by both chambers. It requires Governor Brad Little’s signature. He has indicated that he supports it.
