First tax-cut bill OK, but Idaho deserves better

By Wayne Hoffman

So far this session, House Speaker Scott Bedke and Rep. Mike Moyle have the only tax relief game in town, but it’s pretty difficult to get excited about it. To understand why, recall that the same lawmakers who are mulling tax relief today raised your taxes and vehicle registration fees last legislative session by more than $90 million. Bedke and Moyle provide a proposal that would cut taxes by just $28 million. Furthermore, Bedke, of Oakley, and Moyle, of Star, have given us a tax relief bill that does little to address Idaho’s ongoing problematic tax code. Arguably, the bill makes things worse.

Yes, the effort thankfully does attempt to take a small bite out of Idaho’s top marginal income tax bracket, presently perched at 7.4 percent. This proposal would reduce the rate to 7.3 percent. As I said last year when Gov. Butch Otter proposed (but never followed up on) an identical tax relief plan, the proposal lacks ambition and ultimately does little to resolve Idaho’s confiscatory taxation scheme. If passed, Idaho would continue to remain an economic outlier when it comes to tax policy. Our neighboring states have us beat by a stretch.

The Moyle-Bedke bill would also increase the grocery tax credit by $10, but not for people in the top two tax brackets. This would be the first time since the creation of the grocery tax credit that its distribution was based on income. The whole point of the grocery tax credit is to refund the sales tax that all Idaho residents pay when they shop for groceries, regardless of their income level.

The grocery tax credit has always been a costly problem of Idaho’s tax code. This bill further complicates, rather than simplifies, state tax law: it heads us in the wrong direction. As stated many times, a better proposal is to get rid of the grocery tax altogether. It makes no sense to tax people for their groceries only to refund the money later. Full grocery tax repeal is the one tax law change that has overwhelming popular support.

Over the years, Moyle has been central to many tax cutting efforts, some good and some bad. The bad has to do with his support for tax cuts that allow government officials and agencies to arbitrarily pick the recipients and the amount of the tax breaks for the lucky few. The good has to do with the Legislature’s ongoing efforts over many years to lower the state’s income taxes from well above 8 percent. Moyle was a player, along with tax committee chairs Dolores Crow and Jerry Thorne, in the income tax reductions that started in 2000 and 2001.

Back then, the push for tax cuts was stronger, unapologetic. The need hasn’t changed, but the proposals have become bashful. Idaho’s taxes hit hard. The state tax code places people earning just $11,000 a year in the top tax bracket. This makes the state wholly unattractive to entrepreneurs looking to move here or stay here. The code rips money from people’s pockets at the grocery store checkout line, when they desperately need it most, and then returns the money to them several months later.

Otter’s newly revised budget calls for general fund spending to increase at a near 9 percent pace. His budget calls for the creation of a massive new entitlement program as well as the expansion of many other programs. Plenty of money exists in state coffers for big, bold tax relief. Certainly, the Moyle-Bedke plan would be better than nothing, but not by much, and it is hardly the best the Legislature can or should do.

Wayne Hoffman is president of the Idaho Freedom Foundation.