Rep. Rusche End of Session Newsletter
The Budget “Compromise”
The Senate Tax Committee finally figured out a bill that could win support, and it involved a reduction in the income tax, a replacement of some of the funds into education, and putting some money back into reserves.
This bill was pushed strongly by IACI and the Chambers of Commerce. I think this “compromise” is risky in that it reduces revenue going on into the future by dropping the highest rates for personal and corporate income tax, similarly to what was done in 2001. Shortly thereafter, in 2003, the Legislature was forced to find additional revenue and increased the sales tax from 5% to 6%. Unless the economy grows and tax revenues increase by greater than 7.6%, we will not raise enough money to budget for current needs, and certainly will not be able to replace resources lost in higher education, healthcare, courts and corrections, or begin to make a dent on our mountain of deferred maintenance on state facilities. I do not think the decision was wise or conservative. Here is another view.
Another aspect of the “compromise” that bothered me is that although the tax reduction was touted as producing jobs, the real effect is very limited. Only 16% of Idahoans will see any tax reduction. A family of 4 with standard deductions will need to make more than $62,000 before they see a benefit, and a family with income of $100,000 will see $71 of benefit. The real benefit goes to the highest earners, perhaps the sole benefit. I do not think that is fair.
To be honest, there was discussion that our high state income tax rate was a barrier to companies moving to Idaho. But the existing companies enjoying tax exemptions, tax breaks, are unwilling to agree that removing some of the loopholes and lowering the overall rate is a better choice. I sincerely hope that the economy continues to improve and we are able to afford this. But betting on such a high growth rate that it is far from a sure thing.
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