BOISE — The big income-tax cut and rebate bill that’s now pending in the Idaho House would give most Idahoans rebates at just the minimum amount of $75 per person, or $300 for a family of four, and the lowest-income earners wouldn’t get any ongoing tax relief from the bill, HB 436.
The rebates are for anyone who filed Idaho income tax returns in both 2020 and 2021; they’ll be calculated on the basis of the 2020 return, at either 12% of state income tax paid or $75 per person, whichever is higher.
Rep. Mike Moyle, R-Star, the bill’s co-sponsor, said during the committee hearing on the bill this week, “Every Idahoan benefits from this bill, I want to emphasize that.”
An exception would be anyone who didn’t file an Idaho income tax return in both 2020 and 2021.
Asked how many didn’t file in 2020, Renee Eymann, senior public information officer for the state Tax Commission, said, “The Tax Commission estimates that about 238,000 Idahoans didn’t file an income tax return or a grocery credit refund return for 2020. This is a rough estimate.”
“Every Idahoan should be filing,” Moyle said. Even if they filed only to get the state’s refundable grocery tax credit and didn’t owe any income tax in 2020, they’d be eligible for the minimum rebate of $75 a head, he noted. So would most Idahoans, because that’s all a family of four earning Idaho’s median income of $66,500 would get in rebates.
The reason is that the bill, HB 436, calculates rebates based on Idaho taxable income for the calendar year 2020. In that year, Idaho had a standard deduction of $24,800 off the top of household income, for a married couple filing jointly, to calculate Idaho taxable income. So the family with $66,500 in income had an Idaho taxable income of $41,700. That put them in Idaho’s top tax bracket for that year, at 6.925%, with their tax, according to Idaho State Tax Commission Tax Rate Tables, coming to $2,348. Twelve percent of $2,348 is $282. That’s below the $75 per person minimum for rebates – $300 for a family of four – so that family gets the minimum.
A family of four that earned $100,000 a year in 2020 would get a rebate of $560. A family of four with a 2020 income of $200,000 would get $1,391.
A family of four that earned $1 million in 2020 would get a rebate of $8,039.
The bill, which could come up for a vote in the full House as soon as this week, provides a record $600 million in tax cuts and rebates, surpassing last year’s similar tax-cut legislation. It includes $350 million in one-time rebates and $251 million in ongoing income tax rate reductions for individuals and corporations.
But unlike last year’s bill, which lowered rates in all of Idaho’s income tax brackets, this year’s bill doesn’t offer ongoing tax relief for the lowest earners. HB 436 eliminates the next-to-top bracket, and lowers the top rate from 6.5% to 6%; the corporate income tax rate would see the same decrease.
It also lowers the next-to-bottom bracket from 3.1% to 3%, but it leaves the other two brackets unchanged. That means those in the bottom bracket, with less than $1,000 in taxable income — which translates to less than $26,100 in income for a married couple filing jointly — would get no ongoing tax reduction under the bill. Nor would those in the middle, whose tax rate would remain at 4.5%, with income of up to $28,999 for a married could filing jointly. Those earning more than that group would see reductions.
Moyle said he stands by his statement that everyone benefits.
“You’ll get the 75 bucks,” he said.
The lower earners, he said, “get one-time and not ongoing, but everybody gets a benefit from the bill.”
Rep. Lauren Necochea, D-Boise, the House assistant minority leader and former director of the Idaho Center for Fiscal Policy, said, “This demonstrates upside-down priorities. Idahoans who work for modest to moderate wages are being squeezed by many directions right now. Rent is going up, mortgages are going up, and property taxes are going up. Meanwhile, we’re seeing people at the top of the income spectrum doing very well.”
“Good tax policy would help us build a thriving middle class who can then turn around and spend the dollars that they should have in their pockets in our local economies,” she said.
By BETSY Z. RUSSELL and ALEXANDRA DUGGAN
newsroom@idahopress.com
Last year’s rebates set a minimum of $50, so this year’s marks a 50% increase. However, according to Idaho State Tax Commission figures obtained by the Idaho Press, last year’s rebates went to 706,294 Idaho tax filers, and more than half — 365,295 — received only the minimum amount. That meant a total of $38 million was handed out in rebates to lower income Idahoans, while higher earners received $166.7 million.
Moyle noted that most working Idahoans fall into the state’s top income tax bracket, which applies to married couples earning $30,100 or more in 2021. “Everybody’s rich in Idaho — you’re all in the upper band,” he said.
That means what most would consider lower-middle-income folks pay the same rate as billionaires, which doesn’t bother Moyle.
“I’d like to go to a flat tax and have it be 1%,” he said. Pointing to the lowest bracket among Idaho’s income tax brackets, he said, “I want everybody here. I want everybody paying this rate.”
“Graduated income taxes penalize success,” Moyle said.
Necochea, an expert in taxation and fiscal policy, said, “We hear that again and again. The teacher pays the same marginal tax rate as a billionaire. The GOP’s conclusion somehow is that we need to lower taxes for the billionaire. That doesn’t make sense.”
She said the graduated income tax “balances out the parts of our tax structure that lean more heavily on low and moderate-income people,” mainly sales and property taxes. “Our graduated income tax balances that out a little bit, but not completely. Still, when you take local and state taxes combined, lower and middle income Idahoans are paying a larger share of their income in taxes.”
Taxable income in Idaho may not always be what people assume. For example, Idaho currently has five income tax brackets; HB 436 would collapse that into four. The current top rate of 6.5% applies to all taxpayers with taxable income of $5,000 or more. But Idaho’s standard deduction for 2021 is $25,100 for a married couple filing jointly. To have Idaho taxable income of $5,000 or more in 2021, a married couple filing jointly would have to have earned $30,100.
People with that income or above pay the top rate, though that doesn’t take into account Idaho’s grocery tax credit or other deductions or credits for which taxpayers may qualify. The grocery credit is $100 per person, or $120 for those 65 or older.
Idaho’s current five tax brackets start with those with Idaho taxable income of less than $1,000, at 1%; those between $1,000 and $2,999, at 3.1% of the amount over $1,000 plus $10; those between $3,000 and $3,999 at 4.5% of the amount over $3,000 plus $72; those between $4,000 and $4,999 at 5.5% of the amount over $4,000 plus $117; and the top bracket, $5,000 and over, at 6.5% of the amount over $5,000 plus $172.
The dollar amounts are in there because the first $1,000 each taxpayer earns is subject to the lowest rate; the next chunk to the next rate, and so forth on up.
Idaho’s corporate income tax rate is a single rate of 6.5%; the bill would lower it to 6%. Necochea called that “throwing money out of the state,” citing figures from the Institute on Taxation and Economic Policy estimating that 81% of the benefit from that cut would flow out of state. “Corporate owners can live all over the world,” she said.
Moyle said he wouldn’t support moves to make Idaho’s income tax brackets more graduated, with higher step-ups for higher earners, and instead would prefer to see them lowered.
“Why should we not treat everybody the same?” he asked. “We shouldn’t be picking winners and losers.”
Betsy Z. Russell is the Boise bureau chief and state capitol reporter for the Idaho Press and Adams Publishing Group. Follow her on Twitter at @BetsyZRussell.