Bill Description: House Bill 332 reduces Idaho's personal and corporate income tax and also provides for a one-time tax rebate check.
Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?
House Bill 332 amends Section 63-3024, Idaho Code, to reduce each bracket of the state's progressive income tax structure as follows:
When Idaho taxable income is:
Less than $1,000, the rate is reduced from 1.1125% to 1%.
$1,000 but less than $2,000, the rate is reduced from 3.125% to 2.8%.
$2,000 but less than $3,000, the rate is reduced from 3.625% to 3.3%.
$3,000 but less than $4,000, the rate is reduced from 4.625% to 4.25%.
$4,000 but less than $5,000, the rate is reduced from 5.625% to 5.2%.
$5,000 but less than $7,500, the rate is reduced from 6.625% to 6.2%.
$7,500 and over, the rate is reduced from 6.925% to 6.5%.
The impact of these bracket changes can be a bit difficult to calculate, but the impact on someone with a taxable income of $20,000 would be a reduction in state income taxes from $1,212.51 to $1,133.00. This would reduce the effective tax rate from 6.1% to 5.7%. (This example is based on the statutory rates, not the 2020 rates adjusted by the current year index formula.)
While this is a relatively small tax reduction overall (and far less impactful than the total tax reduction contained in HB 199, which also reduced state sales taxes), it is still a tax reduction. It should be noted, however, that the primary source of funding for this tax reduction is the revenue collected from the tax increase implemented a few years ago when the state began charging sales tax on out-of-state purchases made online.
House Bill 332 amends Section 63-3025, Idaho Code, to reduce the state's corporate income tax from 6.925% to 6.5%.
House Bill 332 eliminates a provision in 63-3620F that would have sunsetted the collection and placement of internet sales tax collections in a tax relief fund. Under current code, after July 1, 2024, the tax relief fund sunsets and the funds go into the distribution formula. This bill’s tax reductions do consume a large portion of the tax relief fund, however, there should be remaining money in the future, which is allocated to future tax relief efforts.
Does it increase government redistribution of wealth? Examples include the use of tax policy or other incentives to reward specific interest groups, businesses, politicians, or government employees with special favors or perks; transfer payments; and hiring additional government employees. Conversely, does it decrease government redistribution of wealth?
House Bill 332 amends Section 63-3024, Idaho Code, to implement a one-time "tax rebate" of at least $50 per taxpayer and dependent or "approximately equal to" 9% of the tax amount reported on the 2019 state income tax form. To qualify, Idahoans must have filed both an Idaho individual income tax return in both 2019 and 2020. Those who qualify will receive the higher of $50 "per taxpayer and each dependent" or 9% of the tax amount reported on their tax form.
While this rebate is presented as tax relief, some people will receive more than they actually paid in income taxes while others will receive 9% back on what they paid. Indeed, thousands of Idahoans who paid no income tax at all will receive rebates under this proposal.
This $50 minimum rebate will serve to provide a greater percentage tax reduction to those in lower income brackets, and thus is better characterized as wealth redistribution than as tax relief.
However, on the upper end of the income scale, the 9% payout will be a large dollar amount. This rebate has the characteristic of rewarding those who paid no or little taxes and those on the high end, with less relief targeted at the middle class.
Does it increase government spending (for objectionable purposes) or debt? Conversely, does it decrease government spending or debt?
The one-time payment to those who don’t pay income taxes will cost the tax commission money to implement. There are approximately 80,000 joint filers who pay no income tax.
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