After lengthy debate on the House floor Thursday, representatives voted 49-20 to pass a $35 million tax cut, a move proponents says will enhance job creation.
Critics of the legislation, however, argued the bill irresponsibly cuts revenues when critical government services lack appropriate funding.
House Majority Leader Mike Moyle, R-Star, the lead sponsor of the proposal, said the measure would leave more money in the pockets of Idahoans and small businesses. “It’s going back into the economy and it’s going to roll,” Moyle said of the cuts. “This is a good thing for Idaho.”
The measure would bring down LLC and individual tax rates from 7.8 percent to 7.4 percent and larger corporate rates would drop from 7.6 percent to 7.4 percent.
The legislation’s lead co-sponsor, Rep. Marv Hagedorn, R-Meridian, argued that because the state has enjoyed extra money at the conclusion of the past two fiscal years, it’s time to stop taking so much from Idahoans. He also said the measure would bring about a private sector stimulus. “This is not our money,” he said. “The people that pay this money spend it much better than we could.”
One of the lead foes of the legislation was Rep. Dennis Lake, R-Blackfoot, who heads up the House Revenue and Taxation Committee. Lake said the tax cut would likely mean the state will forgo extra money going into reserve accounts, which helped the state make it through slumping revenues caused by recent economic doldrums. He also warned that the tax cut could mean not having enough revenue to meet expenses next year. “You better think it through very carefully,” Lake warned.
Others, including House Minority Leader John Rusche, D-Lewiston, and Rep. Brian Cronin, D-Boise, said the state’s priority should first be filling funding gaps and not decreasing revenues. “I think that conservative and prudent financial management speaks against this revenue decrease,” Rusche said.
Cronin called the cut a “shell game,” suggesting that the state’s failure to restore money cut from education and health programs leads taxpayers to pay elsewhere through higher property taxes. “It’s kicking the can down the road,” Cronin warned.
Others occupied the middle road of the debate. Rep. Fred Wood, R-Burley, voiced support for the concept of tax reduction, but said the idea is premature. “This is not a bad bill, but it is a premature bill,” Wood argued. “I don't think that the tax relief contained in this bill is going to suddenly unleash our economy.”
Rep. Bill Killen, D-Boise, followed Rusche’s logic, but also aligned himself with Wood. Killen said it’s not the appropriate time to cut revenues, and instead favored patching funding holes. “It may be a good bill, but it’s too soon,” Killen warned.
Rep. Lenore Hardy Barrett, R-Challis, disputed the timing issue, however. “It’s always a good time for a tax cut,” Barrett urged.
The legislation is less tax relief than was requested by Gov. Butch Otter in his State of the State address. He asked for $45 million, though he didn’t give any specifics as to which taxes should be cut. In committee testimony, the governor’s top aide endorsed the bill.
There was little question coming into debate Thursday that the measure would pass. Some 40 House lawmakers, more than enough to obtain the 36 votes needed for passage, are co-sponsors of the legislation.
Wood and Lake were among the eight Republicans who opposed the tax cut. Also voting against the measure were Reps. JoAn Wood, R-Rigby, Jeff Nessett, R-Lewiston, Leon Smith, R-Twin Falls, Bert Stevenson, R-Rupert, and Mack Shirley, R-Rexburg.
All Democrats opposed the bill, with the exception of Rep. Elfreda Higgins, D-Garden City, who missed the vote tally.