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House leader proposes reductions to individual, corporate tax rates

House leader proposes reductions to individual, corporate tax rates

Idaho Freedom Foundation staff
February 25, 2014
[post_thumbnail] Rep. Tom Dayley, R-Boise, says he favors a close look at reducing corporate and individual income tax rates in Idaho.

The Idaho House Revenue and Taxation Committee has agreed to consider a bill that would reduce the state’s individual and corporate tax rates. According to the bill’s sponsor, House Majority Leader Mike Moyle, R-Star, taxation rates would only be reduced if the state government met certain revenue goals.

“The law would start Jan. 1 of 2015,” Moyle told IdahoReporter.com. “There will be a reduction in the rates of all the tax brackets, from the lowest to the highest. The lower brackets at 1.6 percent would go down to 1.5 percent, the upper income tax brackets at 7.4 percent would go to 7.3 percent.”

Moyle explained the provisional component of his legislative proposal: “The next year, Jan. 1 of 2016, we’ll look to see if the state’s revenues year over year grew by at least 3 percent. If they have grown by 3 percent, then it kicks in.”

Moyle continued: “To give you an example, this year our state budget is going to be close to $3 billion, so if we produced $90 million in new revenues then the new tax rates would kick in.” Conversely Moyle said that if the state did not collect an additional $90 million in tax revenues, the new, lower taxation rates would not take hold.

Rep. Tom Dayley, R-Boise, a member of the committee, told IdahoReporter.com that while he wants to know more about the legislation, he likes the idea of reducing taxation rates. “We’ll be taking a serious look at this and debating it after the bill is printed. But I do know this. If we’re going to grow our economy we need to pay attention to our neighboring states and remain competitive with their taxation rates.”

According to research from the Tax Foundation, a nonpartisan, nonprofit think tank in Washington, D.C., three of Idaho’s neighboring states—Wyoming, Nevada and Washington—have no personal income tax rate.

Among Idaho’s other neighboring states, income tax rates are: Montana ranges from 1 percent on the low end to 6.9 percent for upper income earners; Oregon ranges from 5 percent to 9 percent; and Utah taxes all levels of income at a flat 5 percent.

Moyle’s tax reduction plan would also seek to reduce corporate taxes within Idaho. “Our corporate tax starts at 7.4 percent,” he told IdahoReporter.com, noting that if the state revenues grow according to his formula, the corporate tax would gradually be reduced a tenth of a percent. He says that with the designated growth in tax revenues his proposal could bring Idaho’s corporate tax rate down to 6.8 percent.

According to Scott Drenkard, an economist at the Tax Foundation, Idaho has competition among its neighbors when it comes to attractive corporate tax rates. “Wyoming and Nevada have no tax on corporations at all,” he told IdahoReporter.com. He added that Utah taxes corporations at 5 percent, Montana comes in at 6.75 percent and Oregon taxes corporations at 7.6 percent.

“Washington is the worst among Idaho’s neighbors when it comes to taxing corporations,” Drenkard said. While Washington doesn’t have a corporate tax, it levies what is referred to as a “gross receipts tax.”

Washington’s gross receipts taxation rate ranges from .13 percent to 3.3 percent, but Drenkard warns that one should not be persuaded by the lower percentage figures. “It’s really more onerous than a corporate tax,” he said of the tax. “In Washington, the gross receipts tax is levied multiple times at multiple levels. It’s a huge disincentive for business.”

Dayley said he is looking forward to further discussion about Moyle’s proposal in the committee. “I’m sure there will be plenty of debate beginning in about a week. I also know, however, that when you look at the policies of both Presidents John F. Kennedy and Ronald Reagan, we see pretty clearly from those examples that when taxation rates were reduced, revenues to the government actually increased. I think this can be good for everybody.”

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