BOISE, AP — A massive tax cut and education spending bill made possible by the state’s projected $2 billion budget surplus is moving at lightning speed through the Legislature and head to the Plenary Assembly on Thursday.
The House Revenue and Taxation Committee unanimously approved the bill which provides an annual increase of $410 million through education sales taxes as well as an income tax refund of $500 million this year and an ongoing corporate and income tax cut of $150 million by creating a 5.8% flat tax. .
“It’s definitely a step in the right direction,” Superintendent of Public Instruction Sherri Ybarra told lawmakers, noting it will help in a variety of ways, including with a teacher shortage in the state.
Republican Gov. Brad Little recalled the part-time Legislature in Boise last week over what he said was high inflation, currently at 8.5%, hurting taxpayers and the education system.
The bill has enough co-sponsors in the 70-member House and 35-member Senate to pass, and is widely expected to go to the governor’s office for signing Thursday night.
The one-time income tax refunds of $500 million represent 10% of taxes paid in 2020, with a minimum refund Democrats fought for of $300 for individual taxpayers and $600 for those filing jointly. . The bill requires the Idaho State Tax Commission, where possible, to issue refunds in that fiscal year, which ends June 30. But lawmakers have said the refunds will likely occur this calendar year.
The ongoing tax cut of more than $150 million involves the creation of the flat corporate and personal tax rate of 5.8% starting next year. The corporate tax rate is currently 6%, the same rate for the highest income bracket in the state. Under the bill, the first $2,500 of income for individuals and $5,000 for joint filers would be exempt from tax.
The flat tax “has been a dream for a lot of people for a long time,” Republican Rep. Steven Harris said. “And we do it in such a way that every taxpayer is better off. From the poor to the rich, everyone is better off.
The bill bolsters K-12 public schools and post-secondary education with $410 million a year from sales taxes starting next year. Of the $410 million, $330 million is proposed for K-12 and $80 million for post-secondary education.
An early version released last week called for a 3% annual increase in education spending, but that troubled some Republican lawmakers and was dropped from the bill introduced Thursday. Democratic Rep. Brooke Green said the defeat was disappointing, but she expected the bill to still pass the House.
Fred Birnbaum of the Idaho Freedom Foundation, a libertarian group with a history of opposing spending money on public education, asked the committee to reject the legislation.
“He basically buys into the idea that we kind of have underfunded schools,” he told lawmakers.
But some education officials who testified said they could not compete with the salaries offered by fast food restaurants.
Business leaders across the state have complained that Idaho’s education system is falling behind, hampering efforts to attract new businesses and retain existing ones. Idaho has ranked at or near the bottom in spending per student for years.
“We’ve been on the floor for a long time, and it takes a while to get off this floor, so we’re not the last ones anymore,” said Alex LaBeau, president of the Idaho Association of Commerce and Industry.
Thursday’s House hearing included members of the Senate Local Government and Taxation Committee, which listened to public testimony but did not act because the bill is not yet officially in the Senate. The senators left before the House committee had debated and voted on the bill.
If the bill passes the House, it will then be returned to the Senate for consideration.
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