Idaho governor signs massive tax cut and education bill

BOISE, Idaho (AP) — Idaho Gov. Brad Little on Thursday night signed a massive tax cut and education spending bill made possible by the projected $2 billion budget surplus. of State.

The Republican governor signed the bill after making a quick trip through the Legislature in a one-day special session, passing the House 55-15 and the Senate 34-1.

The legislation provides for an annual increase of $410 million through education sales taxes as well as a $500 million income tax refund this year. The bill also provides an ongoing corporate and income tax cut of $150 million by creating a 5.8% flat tax.

Last week, Little recalled the part-time Legislature to Boise due to high inflation, currently at 8.5%, which he said was hurting taxpayers and the education system.

“I am proud of my legislative partners for confronting the substantial impacts of inflation head on by putting our record budget surplus back in the pockets of Idahoans while responsibly funding education at historic levels for us. ensure that we meet our constitutional and moral obligation to Idaho students and families in the short and long term,” Little said in a statement.

The bill contains the tax refund and a long-sought flat tax popular with Republicans. Democrats liked the education spending component. This made it difficult for many lawmakers from both parties to oppose and, despite complaints, easily obliterated both houses.

“Writing a tax bill is an interesting process,” Republican Sen. Scott Grow, who supported the bill, said during a debate in the Senate Local Government and Taxation Committee. “Here we have 105 legislators, and I can guarantee you we have 105 opinions on what this bill should be. That’s not exactly what I would have done. »

Attempts in the House to split the bill into parts failed with lopsided votes.

The legislation was announced last week, albeit slightly modified in the version lawmakers passed on Thursday morning. He had enough co-sponsors in the 70-member House and 35-member Senate to pass, and he was expected to go to the governor’s office for his signature.

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.

“In two years, we’ve gone from seven tranches to five tranches to four tranches,” Republican Representative Steven Harris said during a House debate. “This year, only one flat tax bracket in Idaho. It’s incredible. That’s wonderful. Every dollar you earn is not punished when you increase this income rate.

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 what lawmakers call in-demand occupations. How all that education money is spent will be decided by future legislators.

An early version of the bill made public last week called for a 3% annual increase in education spending, but that troubled some Republican lawmakers and it was dropped from the bill introduced Thursday morning. But the bill still held support from Democrats.

“Our children and grandchildren need an education system that will allow them to compete in the global economy,” said Democratic Senator Janie Ward-Engelking, a former teacher and education advocate.

Funders say the legislation will lift Idaho from the bottom of the country in spending per student. 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.

The special session comes before the November elections when all 105 Idaho state legislative seats are up for election, along with the governor and other elected state officials.

Also on the ballot in November is an initiative called the Quality Education Initiative, which funders say would increase funding for education by raising taxes on businesses and individuals earning $250,000 or more a year.

Funders say schools in Idaho are severely underfunded and the initiative would raise more than $300 million.

If adopted by voters, it will come into force on January 1. However, if Little signs the bill passed in the special session, as expected, it will go into effect Jan. 3, nullifying and replacing the initiative.

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