BOISE, Idaho (AP) — A massive tax cut and education spending bill made possible by the state’s projected $2 billion budget surplus continued its speedy trip through the Idaho Legislature on Thursday.
The House voted 55-15 to send to the Senate the bill that has a $410 million annual increase through sales taxes for education as well as a $500 million income tax rebate this year. It also has an ongoing $150 million income and corporate tax cut by creating a 5.8% flat tax.
Republican Gov. Brad Little last week called the part-time Legislature back to Boise for a special session due to what he said was high inflation, currently at 8.5%, harming taxpayers and the education system.
The bill contains the tax rebate and a long sought after flat tax liked by Republicans. Democrats like the education spending component. That makes it difficult to oppose for many lawmakers in both parties.
The legislation was announced last week, though slightly changed in the version lawmakers took up Thursday morning. It has enough co-sponsors in the 70-member House and 35-member Senate to pass, and is widely expected to make it to the governor’s desk for his signature.
The one-time income tax rebates of $500 million amount to 10% of taxes paid in 2020, with a minimum rebate that Democrats fought for of $300 for individual taxpayers and $600 for those filing jointly. The bill requires the Idaho State Tax Commission, to the extent possible, to issue the rebates this fiscal year, which ends June 30. But lawmakers have said the rebates would likely happen this calendar year.
The ongoing tax cut of more than $150 million involves creating the corporate and individual flat tax rate of 5.8% starting next year. The corporate tax rate is currently 6%, the same rate for the state’s highest income bracket. Under the bill, the first $2,500 of income for individuals and $5,000 for people filing jointly would be exempt from taxes.
“In two years, we’ve gone from seven brackets to five brackets to four brackets,” said Republican Rep. Steven Harris during debate on the House floor. “This year, one bracket flat tax in Idaho. That’s amazing. That’s wonderful. Every dollar you earn doesn’t get punished as you move up that income rate.”
The bill bolsters K-12 public schools and post-secondary education with $410 million annually from sales taxes starting next year. Of the $410 million, $330 million is proposed for K-12 and $80 million for what lawmakers are calling in-demand occupations. How all that education money is spent will be decided by future lawmakers.
An initial version of the bill made public last week included an annual increase of 3% in the education spending, but that troubled some Republican lawmakers and it was cut from the bill introduced Thursday morning. But the bill still retained support among Democrats.
“Idaho’s students and teachers have been last in the nation for too long, and we’re at a breaking point,” said Democratic Rep. Lauren Necochea in arguing for the bill.
Backers say the legislation will lift Idaho from 51st in the nation to 49th in spending per pupil. The state’s business leaders have complained that Idaho’s education system is falling behind, hurting efforts to attract new companies and retain existing ones.
Several Republican lawmakers, though they liked the bill, objected to the process, especially their concern it was written by the governor’s office rather than the Legislature and included multiple elements making it difficult to vote against.
“Make no mistake, we are being railroaded,” said Republican Rep. Vito Barbieri.
Republican Rep. John Vander Woude expressed anger with the special session called with an election only a month away. All 105 seats in the Legislature are on the ballot as is the governor and other statewide elected offices.
“Now we have a fake emergency and we call a special session for political purposes,” Vander Woude said. “Is the bill bad? No, I think the bill is good. I like the bill. I just don’t like the process. I’ll probably vote for it because you’ve got me in a corner.”
Vander Woude voted to pass the bill.
An attempt by some Republican House members to break the bill into multiple parts and another attempt to amend it both failed on lopsided votes.
The bill now goes to the Senate.
