Bill Description: House Bill 380 reduces Idaho's personal and corporate income tax and also provides for a one-time tax rebate check.
Analyst Note: House Bill 380 is similar to House Bill 332, but it lacks the repeal of a sunset on the placement of internet sales tax collections in a tax relief fund. House Bill 380 also reduces the existing seven income tax brackets to five, which House Bill 332 did not do.
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 380 amends Section 63-3024, Idaho Code, to reduce Idaho's seven income tax brackets to five and to lower the top bracket from 6.925% to 6.5%. The highest bracket will kick in at a lower income than it did previously, shifting down from $7,500 to $5,000 in statute. Adjusted for the 2020 index formula, the highest bracket will kick in at $7,840 rather than $11,760.
The impact of these bracket changes can be a bit difficult to calculate, but the impact on a single income tax payer with $15,000 in taxable income would be a reduction in state income taxes from $768.27 to $735.10 This would reduce his effective tax rate from 5.1% to 4.9%.
While this is a relatively small tax reduction overall (and far less impactful than the total tax reduction proposed in House Bill 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 380 amends Section 63-3025, Idaho Code, to reduce the state's corporate income tax from 6.925% to 6.5%.
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 380 creates Section 63-3024B, Idaho Code, to implement a "onetime, nontaxable income 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 one-time, $220 million tax rebate is presented as tax relief, some people will receive more than they actually paid in income taxes while others will receive as little as 9% back on what they paid. Indeed, tens of thousands of Idahoans who paid no income tax at all will likely 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, for someone on the upper end of the income scale, the 9% rebate on income taxes paid could be a large dollar amount. This rebate has the characteristic of rewarding those who paid little or no taxes and those on the high end, with less relief targeted at the middle class.
As with the tax cut above, this tax rebate is primarily funded with 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.
Does it increase government spending (for objectionable purposes) or debt? Conversely, does it decrease government spending or debt?
The one-time tax rebate payment to those who don't pay income taxes will cost the tax commission money to implement. There are approximately 80,000 filers in Idaho who pay no income tax yet will still receive tax rebates.