Huge tax break heads to governor

BOISE — The Idaho Senate has passed an estimated $253 million income tax cut, which also includes tax exemptions for some military pensions and an elimination of the capital gains tax on precious metal bullion.

After around an hour of debate, members voted 28-7 to send House Bill 40 to the governor.

During debate, some questioned reducing a large amount of state revenue ahead of the state budget-writing committee deciding on a revenue projection for next fiscal year, and amid economic uncertainty ahead with increased tariffs and retaliatory tariffs that went into effect Tuesday.

Those who favored it said the best way to contain government spending is to reduce its revenue flow and that the state should be returning the money to Idahoans who pay the most in taxes.

Bill sponsor Sen Doug Ricks, R-Rexburg, said more money in Idahoans’ pockets would stimulate the economy.

The bill passed amid other proposals to spend around $100 million toward property tax relief and $50 million for increasing the grocery tax credit. The House on Tuesday passed the property tax bill, HB 304, which would annually send $50 million to the state school facilities fund for use by school districts to pay off bonds and levies, and another $50 million to a fund that goes toward reducing homeowner property tax bills.

The governor last week also signed into law a $50 million school choice tax credit bill.

Under HB 40, a household earning between $55,600 and $91,800 would save around $127 on average on state income taxes, according to a report by the Idaho Center for Fiscal Policy. Those earning up to $146,000 would average about $264 in savings.

Senate Minority Leader Melissa Wintrow, D-Boise, said in addition to being the largest cut, she also thought it was “the most irresponsible” given the ongoing revenue reduction. She also noted that the bill disproportionately benefited wealthy taxpayers.

“I don’t see how this helps working families,” Wintrow said.

She highlighted a preliminary report released this week from the Division of Financial Management showing the state is around $57 million behind fiscal year 2025 projected revenues so far this fiscal year.

Sen. Jim Guthrie, R-McCammon, made a similar argument, also highlighting economic uncertainty. He noted that stock markets fell Tuesday — with the Dow falling 1.8%, or more than 770 points, and the Nasdaq and S&P 500 also falling 1.5%, NPR reported.

“Believe me, I’m all for cutting taxes,” Guthrie said. “I believe this discussion today provides us an opportunity for a win-win, although I fear we will not seize the moment … let’s not spend all our money in one spot.”

He argued for a smaller income tax reduction to add space for incoming bills on property tax relief, grocery tax relief as well as school facility funding and water infrastructure.

He said his first session was amid the fallout of the Great Recession when the state cut the general fund budget by $800 million.

“It’s incredibly painful,” he said. “Let’s consider a measured approach today and not spend so much money in one place.”

Guthrie and Sen. Jim Woodward, R-Sagle, were the only Republicans to join all the Democrats in voting against the bill.

Sen. Kevin Cook, R-Idaho Falls, also expressed concern about spending so much money ahead of setting a revenue projection and said that it was setting a precedent; Cook nonetheless voted in favor of the bill.

Sen. Scott Grow, Eagle, who is the co-chairperson of the budget-writing committee, said that the revenue projection is always a guess and that reducing revenue will contain spending.

“Uncertainty is always ahead of us,” Grow said. “... If we were to err, I would would rather err on the side of being conservative and tighten the income stream.”

Senate Assistant Minority Leader James Ruchti, D-Pocatello, argued that the available information indicated “what we’re about to do is a really, really bad idea.”

“I’m no prophet, but I don’t think it takes a prophet to read the tea leaves on this one and decide that this would be fiscally irresponsible,” Ruchti said.

Gov. Brad Little has previously indicated the combined effect of the proposed tax cuts — around $450 million when including the school choice tax credit — is outside of his $100 million for tax cuts that he recommended in his budget for this year.

Little told reporters at a news conference last week, “If I thought we could do $450 (million), I would’ve proposed $450 (million).”

The bill now goes to his desk to sign, veto or let go into effect without a signature.

Guido covers Idaho politics for the Lewiston Tribune, Moscow-Pullman Daily News and Idaho Press of Nampa. She may be contacted at lguido@idahopress.com and can be found on Twitter @EyeOnBoiseGuido.