Three tax-cut bills — four, if you include an education tax credit bill — are before the Idaho Legislature. And yes, they are all affordable.
A Little History
Over the past five years, ongoing and one-time tax cuts have reduced the tax take by $4.6 billion, of which about $930 million is ongoing. However, it is important to point out that the cumulative state spending over the same time period has been $42.3 billion, with nearly $8 billion ongoing. If the Legislature is able to control the state general fund and dedicated spending fund growth, even more tax cuts could be forthcoming. Over the last five years, had state spending increases been held to population plus inflation, over $1 billion would have been freed up for ongoing tax relief.
Let’s Review the Bills and Their Costs
These four tax-cut bills total over $400 million if you include one-time cuts.
House Bill 40 is the most generous bill, providing ongoing relief of over $250 million by reducing the income tax rates from 5.695% to 5.3%, eliminating the capital gains tax on precious metal bullion, and including a tax break for veterans’ pensions. HB 40 passed the House on a 62-7 vote, with two Democrats, representatives Theodore Achilles and Soñia Galaviz, breaking ranks and joining the Republican caucus that was unanimous in support of the bill.
House Bill 61 is an increase in the tax credit, commonly known as the grocery credit, by up to $35 per person. The $50 million increase does not keep up with inflation since the credit increased in 2022. Rather than increasing the grocery tax credit, it makes more sense to simply stop taking money out of Idahoans’ pockets for sales taxes on groceries in the first place. Nearly every state has stopped doing this, but unfortunately, despite years of trying, this is not the bill described above. Eliminating the sales tax on food would be a $400 million tax cut — now that’s a tax cut.
House Bill 74 is a property tax bill that provides $50 million of one-time relief directly to homeowners and $50 million of ongoing property tax relief through the secondary effect of putting downward pressure on bonds and levies. This is done with $50 million of additional money to the School District Facilities Fund.
There is probably some confusion among the public concerning how much relief has been achieved. After reviewing the data for the last four years, from 2020 to 2024, the property tax relief has kept overall property taxes flat after accounting for the tax relief applied to schools and directly to homeowners. But, to be clear, budgets are not decreasing; sales taxes are just being shifted to cover property tax budgets. We see this in the chart below, where schools require less property taxes because they are getting more from the state. In four years, the counties have increased their property tax take by 25%, and the cities have increased theirs by a whopping 40%.
The spending problem has not been resolved. Essentially, we are shifting money to provide tax relief.
And finally, we have House Bill 93, The Parental Choice Tax Credit. Although it is a school choice bill that uses a tax credit as a vehicle to allow parents to pick the best education option for their children, the bill’s limitations cap its cost at $50 million.
Our view is that the tax cuts on offer are just a starting point. It was said during testimony in favor of HB 40 that tax cuts were necessary to prevent the Legislature from spending away the revenues. We disagree with that notion. Spending should be based on the proper role of government, limited government, and all revenues not necessary for its operation belong in the hands of the taxpayers who earned the money. And that means additional tax cuts should be on the table.
