A growing number of Idaho lawmakers are struggling to commit to Gov. Butch Otter’s nosebleed budget. Moreover, they’re starting to rebel against the administration’s disingenuous narrative of how Otter’s proposed budget includes taxes cuts. The fact is, there are no tax cuts, but that’s not stopping the claim.
When the usual accounting gimmicks are brought to light, Otter is pushing for an 8.5 percent increase in general fund spending. If you’re not sure whether that’s a lot, will your household income increase by that much in 2016? Unless you won the Powerball lottery, the odds are, it won’t.
Otter’s budget seeks to deplete a $102 million year-end fund balance and absorbs every penny of $150 million in projected new tax revenue. The plan is so bloated, even moderate lawmakers have said they’re unsettled by it and are looking for ways to drain the fat.
The new stratospheric spending is the reason Otter again offered no real tax relief this year. That’s why Team Otter, which includes Lt. Gov. Brad Little, has reverted to the convoluted claim it made in 2015: Just because the plan doesn’t explicitly lower Idaho’s tax rates doesn’t mean it doesn’t lower taxes.
“Well, actually, there will be tax relief,” claimed Little in an interview. Little said the tax cuts are found in Otter’s desire for the state to accept the federal tax law changes passed last December by Congress. Idaho’s tax code usually recognizes the adjustments to income contained in the federal tax code. In December, Congress made permanent a series of tax cuts, and extended and expanded others. The biggest of these is the Section 179 deduction that lets certain property and equipment be deducted as an expense instead of depreciated. This is particularly important to farmers, who might buy a piece of farm equipment and get to deduct up to $500,000.
For Section 179 and other deductions to apply to Idaho’s income tax, the Legislature will need to “conform” Idaho’s tax code to the federal tax code. If the Legislature doesn’t act — if it doesn’t conform the state’s tax law to recognize the federal tax law changes — taxes will go up for Idahoans attempting to claim the deduction. Even if the Legislature accepts the federal changes, taxes will stay exactly the same. They won’t go up. They won’t go down. That is not tax relief.
The only thing preventing tax relief: Otter’s bloated budget. Everyone at the Statehouse knows this.
It’s also well-known, should lawmakers cut the governor’s wishful spending increases by at least half, Idahoans would be able to enjoy substantive tax relief. That could come in the form of lower income taxes, the removal of the tax on groceries, or the elimination of the personal property tax.
To recap, conforming the state’s tax code to the federal tax code is not tax relief. To compound Otter’s Fantasy League Budget issues, those same legislators who raised taxes last year are up for re-election this year; they should be skittish about lifting more money from the pockets of Idahoans.
That’s why Gov. Otter’s budget, and Little’s defense of it, is in trouble right out of the gate. If lawmakers would do the hard work and dial back the spending, real tax relief — not phony Butch Otter or Brad Little tax relief — has a good chance of passing.