Otter, lawmakers must ease burdens in 2016

Wayne Hoffman Articles, Fairer, flatter taxes

This winter, Idaho lawmakers and Gov. Butch Otter must figure out how to provide $100 million — and as much as $200 million — in tax relief. We’re talking about real tax relief. Why cut taxes? Because Idahoans are struggling to make ends meet, and the state’s confiscatory tax policies are squarely to blame.

A person earning about $11,000 in taxable income finds herself in Idaho’s top tax bracket — 7.4 percent — the highest in the region. Cutting income tax rates, contrary to popular belief, doesn’t benefit just the rich, it benefits the working poor too.

When it comes to tax reduction or elimination, another place to start is the sales tax on food. Idaho is one of a few states that taxes people for buying food. Worse, the state doesn’t use that tax revenue to buy government services. Instead, the state hangs onto the money and gives it back months later via income tax returns. It’s almost like a Christmas Club account, only you’re forced to participate.

The state’s personal property tax can also be cut. This onerous tax requires businesses to painstakingly itemize, report and pay taxes on everything from machinery to office furniture, beyond the first $100,000 in value.

Cutting taxes is only part of the better-budget equation. To cut, lawmakers have to be more vigilant when it comes to spending. They need to recommit to conservative budgeting. Annual spending increases of 6 or 7 percent have become normal, and have led to a state budget that in 2015 passed the $3 billion mark last winter.

The Legislature typically focuses all its time examining new ways to add to the state government profile, rather than find ways to reduce existing program expenditures. Usually, lawmakers start the budget process by taking whatever amount agencies got last year and adding to it. Instead, agencies should be forced to answer the question, “What if you got 98 or 99 percent of last year’s appropriation?” That is what families have to do all the time, and often on a bigger scale. Adjusting the starting budget by 1 or 2 percent could save taxpayers $12 million to $23 million and would create a leaner government.

Setting a budget is the Legislature’s most important task, but it’s not a task just for government and elected officials. Everyone has a role to play, which is why Idaho Freedom Foundation started the dialogue by releasing its own state budget, which calls for $3.1 billion in total spending, an increase of 2.6 percent.

IFF’s proposed budget increases spending about 4.7 percent for public schools, colleges and universities. That includes a 3.5 percent increase in discretionary funds for classrooms.

The IFF budget also calls for the phase-out of the state’s single-payer health care program, known as the CAT fund, and puts $3 million into a pilot community health care program that would provide services to those Idahoans who do not qualify for insurance subsidies or for Medicaid.

Further, our budget allocates $5 million to replace some federal grants with state dollars. Why? Because we should not leave our citizens vulnerable to the whims of Washington, D.C., especially for programs and services that are critical to the well-being of Idahoans.

The IFF budget that has been presented to the Legislature would provide between $100 million and $200 million in tax relief for Gem State residents. Other Idahoans may have different ideas. The point is to start the discussion now so lawmakers can pass a budget that cuts taxes now and results in a better, leaner government into the future.

See IFF’s full budget proposal here.