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House passes conditional income and corporate tax reduction plan

House passes conditional income and corporate tax reduction plan

Idaho Freedom Foundation staff
March 4, 2014
[post_thumbnail] House Majority Leader Mike Moyle, R-Star, successfully sponsored legislation that could reduce the state's income and corporate tax rates.

The Idaho House of Representatives has passed a measure to allow for a reduction in state income tax rates and corporate taxes in the future if certain government revenue goals are achieved. House Bill 548 passed 54 to 13, and now goes to the Senate.

House Majority Leader Mike Moyle, R-Star, presented the bill before the House. “This would cut everybody’s tax rates and would give a boost to those down at the bottom income levels.”

If the Senate approves the measure and it is signed in to law by Gov. Butch Otter, the legislation would be implemented Jan. 1, 2015. Then, Jan. 1 2016, if Idaho has at that time grown its state revenues by 3 percent above the previous year, income tax rates would be lowered.

Lower income earners, currently tax at a rate of 1.6 percent, would see a drop to 1.5 percent. Upper income earners, currently taxed at a rate of 7.4 percent, would see their tax rate drop to 7.3 percent.

Last month Moyle explained the bill to IdahoReporter.com offering 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.

Moyle noted from the House floor that he believes Idaho needs to be competitive with its neighboring states when it comes to taxation rates. Wyoming, Nevada and Washington have no personal income tax rate, Moyle said.

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 also seeks to reduce corporate taxes within Idaho. Idaho’s current corporate tax rate start at 7.4 percent, but if state revenues grow according to the formula outlined in the bill, the corporate tax would gradually be reduced a tenth of a percent. Moyle told House members that House Bill 548 could bring Idaho’s corporate tax rate down to 6.8 percent.

According to Scott Drenkard, an economist at the national 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 in February. 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.”

The entire Democrat membership in the House voted against the tax bill. Rep. Neil Anderson, R-Blackfoot, was the only Republican to vote against it.

“I voted no because Idaho is 50th in the nation on what we spend on education.” Rep. Phylis King, D-Boise, told IdahoReporter.com. “We need to fully fund education. We have about $6 million in scholarships for Idaho students going to Idaho schools, but our neighbors to the west have $60 and $80 million in scholarships. Our state employees are about 19 percent under what the private sector pays. We need to get back up to normal levels before we start giving away money in a tax break.”

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