Why are Idahoans being told to wait for Trump’s tax cuts?
At the beginning of each legislative session, the Joint Finance-Appropriations Committee (JFAC) adopts — or attempts to adopt — a three-year revenue estimate: the current fiscal year and the two upcoming — in this case, an update for Fiscal Year 2026 (FY26), FY27, and FY28. The first two have meaning, but FY28 is just a placeholder. Last year, the process seemed to drag on; however, this year, it was over in one morning session.
Why is this important? Well, the General Fund budget is like your checkbook, in a sense. You start with income to budget expenses, and you never want to go negative and bounce a check. The Idaho Constitution does not allow the Legislature to end the session without showing a positive ending balance for the current fiscal year, nor the next one, and the Legislature cannot leave without doing so. Drama enters the picture because Democrats and some of their Republican allies do not want to cut taxes, but rather grow spending. They see government revenues as a lobster pot. It’s a one-way money trap.
This brings us to the current forecasted revenue numbers. JFAC reviews projections and recommendations from the Economic Outlook and Revenue Assessment Committee (EORAC), which is tasked with recommending revenue numbers. Over the FY26 and FY27 period, JFAC adopted revenue projections that were $290 million higher than those the governor used in his budget documents, but in line with EORAC recommendations. These increases over two years are roughly 2.6% of the total General Fund Revenue — well within forecast error.
The most important point here is the governor did not want to conform to the federal tax law changes contained in the “One Big Beautiful Bill (OBBB)” until the current tax year, 2026. We are not clear what his reasons were other than cost savings. This matters for two reasons, the most obvious being that there is no reason to delay the tax cut, other than to debate the breadth of conformity. The second is that incomes would have to be calculated differently on state returns in 2025. Full stop — just match the federal changes for 2025. The cost of this proposed conformity, $155 million per year, is small relative to overall revenues and is easily affordable.
Why does the governor want to delay the following tax cuts, which would benefit a broad swath of Idaho citizens? There is no valid reason other than to delay necessary spending reductions.
Among the items that make up this estimated $155 million (midpoint estimate), based on annual cuts, are:
These top five swallow the $155 million in part because the others are smaller and the OBBB has some tax increases, such as ending the home energy efficiency credit, which adds back $4 million to government coffers. The projections above don’t include full conformity for all of the OBBB business tax cuts. That detail, however, is a topic for another day — partial or full business conformity.
Skeptics ask, “Doesn’t a lower revenue forecast put downward pressure on spending?” Well, given that all-funds spending has increased by about 60% over the last six sessions, it is difficult to claim that. It is true that the revenue forecast is for General Fund spending and not all funds, but given the frequency with which General Funds are transferred to other state spending, we still cannot see how the forecast has really slowed spending. This is important to note because, according to the EORAC final report, the actual revenues have exceeded the EORAC revenue projections in nine of the 11 years charted, FY15-25. So, lower projections don’t lead to lower spending.
Finally, what about the claims that spending cuts are only being considered because tax cuts have been excessive, particularly the individual income tax, since it is the largest revenue source for the General Fund?
Nonsense!
Let’s look at the data for the last six years, from before COVID to the current period, and examine individual income tax growth.
That is a total increase of 57.5% or a compound annual increase of 7.9% per year.
But what about more recently, with the tax cuts?
That is a total increase of 12.9% or a compound annual increase of 6.2% per year.
It’s time to stop the hand-wringing over revenues (they have been increasing), conform to federal tax cuts, and give Idahoans a break this spring — not just next spring.
