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Proposition 1's $570 million tax hike no gift to Idaho families, businesses

Proposition 1's $570 million tax hike no gift to Idaho families, businesses

Fred Birnbaum
August 8, 2022

Food prices are through the roof.

Gas prices, while dropping slightly, are crushing Idahoans’ budgets.

Property taxes are pushing homeownership out of reach for too many and pushing those on fixed incomes out of paid-off homes.

Yet, the Lewiston Tribune's Marty Trillhaase says a half-billion tax increase is a gift to Idahoans.

One might only imagine what kind of birthday presents Trillhaase gives.

Proposition 1, Reclaim Idaho’s inappropriately named Quality Education Act, will be on the ballot this November. Originally intended to hike taxes on corporations, small businesses and job creators, the proposal was supposed to hike taxes about $323 million.

The proposal also reverses the tax cuts passed this year, which adds another $250 million to the total tax hike. The 2022 tax cuts reduced rates for nearly everyone in the state, including poor and middle-class families (yet they were opposed by Democrats).

The final cost for Idahoans if this clunker passes is at least $570 million annually.

But there’s more.

Jared Walczak of the Tax Foundation recently noted that the measure would create an expanding tax bracket for the highest rate. Normally, tax brackets rise with inflation so people don’t fall into higher brackets over time. With this error, the bottom limit for the top bracket will decrease as inflation rises over time, causing people with lower and lower incomes to qualify for the higher rate.

This error can’t be blamed on interpretation.

Let’s look at the larger picture here. Idaho recently closed the books on fiscal year 2022 and reported a whopping $1.381 billion surplus, the largest excess tax collection in state history. The state is awash in cash.

That raises a question Trillhaase avoided: If the state has bags of cash lying around, why should voters increase taxes? He conveniently ducks the question because a massive tax hike makes zero sense in this environment.

For example, he ignores massive increases in K-12 spending during the past two years. The state appropriation is up 42% the last two years, and that doesn’t include funds from local sources, such as property taxes, bonds and supplemental levies.

For the 2020-21 school year, the state appropriated $2.341 billion for K-12 public schools. Two years later, that figure jumped to $3.318 billion. For those counting, that’s a $977 million K-12 spending hike during the last two years.

It would be helpful if Trillhaase and the rest of his friends in the media did a deeper dive into where the money went and ask questions about why so many kids aren’t proficient in math or can’t read at grade level.

Doesn’t the public deserve an answer about the additional billion-dollar investment before adding hundreds of millions of dollars more?

Perhaps those things don’t fit Trillhaase’s narrative that money fixes all in education.

Beyond that, Trillhaase and his news media pals ought to review the finances of Idaho’s school districts. It’s little known, but wildly important, that school districts have nearly a half-billion dollars in savings accounts.

For example, the system-wide fund balance for the 2020-21 school year for maintenance and operations was $447 million, about 20% of expenditures for that year. Five years ago that amount was $226 million, or only about 13% of expenditures for the 2015-16 school year.

If schools are underfunded, why are districts growing reserve balances instead of using these resources for students? Trillhaase might also take a look at the funding by district per pupil and marvel at the huge variance in funding, yet scratch his head when he found out that there was no correlation between spending and academic achievement.

Reclaim Idaho’s proposal is no gift to Idahoans, whose budgets and backs are buckling under the weight of record-high inflation. It would be more than unwise to pass a half-billion-dollar tax increase in hopes the Legislature might pass some other form of tax cut to offset the Reclaim Idaho hike.

The prudent path forward is for voters to reject Reclaim Idaho’s tax hike on the poor, the middle class and small businesses, and to push the Legislature to adopt a bold tax relief package in 2023. Such a package would repeal the grocery tax, cut property taxes and further reduce income tax rates.

That’s a gift most Idahoans would love to receive.

Note: This was first posted to the Lewiston Tribune's website.

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