Complicated new tax bill would lower top income tax rates, raise gas tax, remove sales tax from groceries
Complicated legislation to make big changes in Idaho’s tax system – lowering the top income tax brackets to 6.7 percent from the current 7.4 percent, while keeping lower brackets the same as they are now; removing the sales tax from groceries while eliminating the current grocery tax credit; and raising the gas tax by 7 cents a gallon, from the current 25 cents to 32 cents – was introduced this morning in the House Revenue & Taxation Committee.
House Majority Leader Mike Moyle, R-Star, who is co-sponsoring the bill with House Speaker Scott Bedke, R-Oakley, said the gas tax would go up Oct. 1, the sales tax would come off groceries on Oct. 1, and the income tax changes, including the end of the grocery credit, would go into effect for the tax year that started Jan. 1, 2015.
The roughly $42.5 million the gas tax hike would generate in fiscal year 2016 and the $65 million it would generate the following full year would be split 60-40 between state and local highway funds, bypassing the distribution formula that takes a small slice of gas taxes for other purposes, including funding the Idaho State Police and Idaho state parks. Cities and counties would have a three-year “floor” to protect their revenue sharing from sales tax distributions as the changes took effect.
“There’s been great support to remove sales tax off groceries,” Moyle told the committee. “A lot of states are going there – Utah, New Hampshire – because it’s what the people want.” He said the lowered top income tax rate would be just for individuals, not corporations, saying, “We did not want to use money collected from individuals to subsidize lowering the rate for corporations.”
Rep. Mark Nye, D-Pocatello, said, “As I read it, this is a tax increase proposal by the majority party?” Moyle said, “It is in fiscal year 2016. But in fiscal year 2017 that changes, and then it’s a tax cut.” Moyle estimated that the bill would result in a $15 million increase in general fund revenues in fiscal year ’16, the year that starts July 1. “But in the out years … there is a substantial decrease in there,” he said.
House Minority Leader John Rusche, D-Lewiston, said, “It’s a shell game,” and Nye and Rep. Dan Rudolph, D-Lewiston, voted against introducing the measure.
Bedke said, “It’s going to take some time to soak in. I don’t know that everybody’s going to vote for it.” But he said the proposal, in combination with other bills that are moving forward, matches his initial goals for this year’s legislative session: To make significant improvement in education, in transportation infrastructure, and to make Idaho more attractive to businesses. “We had a broad segment of the House working on these issues,” he said. “It’s taken time to bring all those things together.”
