Bill Description: House Bill 436 reduces Idaho's personal and corporate income tax rates 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 436 amends Section 63-3024, Idaho Code, to reduce Idaho's five income tax brackets to four and to lower the top bracket from 6.5% to 6%.
This is a net reduction in taxes. But it should be noted that much of the funding for this tax reduction comes from revenue collected from a de facto tax increase implemented a few years ago. That increase went into place when the state began actively collecting sales tax on out-of-state purchases made online.
House Bill 436 amends Section 63-3025, Idaho Code, to reduce the state's corporate income tax from 6.5% to 6%.
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 436 amends Section 63-3024B, Idaho Code, which was created last session to implement another "onetime, nontaxable income tax rebate." This year's rebate is higher than last year's, at 12% of the tax amount reported on a filer’s 2020 state income tax form. (It was 9% last year.) The minimum rebate increases from last year's amount ($50 per taxpayer and dependent) to $75 per taxpayer and dependent.
Notably, while the rebate percentage is 33% higher than last year’s, the minimum rebate is 50% higher. This means an even larger share of the rebate will be directed to those in lower income brackets, many of whom paid less in income tax than their rebate. As a result, their effective rebate percentage is greater than 100%. Indeed, there are approximately 80,000 filers in Idaho who pay no income tax at all, yet they too will receive a tax rebate of $75 per taxpayer and dependent.
Thus, while this tax rebate program is presented as tax relief, a significant portion of it is more accurately characterized as wealth redistribution.
Analyst Note: If there were no redistribution involved in the rebate, the total rebate percentage would be higher and the money returned to taxpayers would be proportionate to how much they paid. Additionally, the fact that there is a tax rebate (for the second straight year) is strong evidence that tax collections in Idaho are too high. Instead of an inequitable rebate, the state could reduce the sales tax rate or income tax rates (or both). Doing this would do a better job of balancing tax collections with anticipated revenue needs.
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