Income tax cut clears the legislature amid debates over grocery tax

by Logan Finney and Melissa Davlin, Idaho Reports 

The Idaho Senate approved this year’s headline tax proposal on Tuesday, clearing the final legislative hurdle before the bill reaches the governor’s desk. 

The Senate voted 27-7 along party lines to approve House Bill 436. The bill would reduce the brackets and rates for individual and corporate income taxes, and issue a rebate check to taxpayers for $75 or 12% of income tax paid in 2020, whichever is higher. The legislation mimics the cut and rebate structure the legislature passed last year. 

The floor and committee debate in the Senate mirrored much of what’s already been said regarding the bill this session. 

Democrats criticized the bill for allocating $600 million dollars before any other spending priorities, while Republicans spoke in favor of smaller government and returning the state’s massive budget surplus to those who paid into it. 

“It’s not just about doing a tax cut, it’s about doing the right one,” said Sen. Janie Ward-Engelking, D-Boise. She and other Democrats repeatedly pointed to the state’s funding needs in transportation, education, and public safety.

“Even if they don’t appreciate or remember the check for $75, it’s still their money and they should get to keep it,” said Sen. Steve Vick, R-Dalton Gardens. 

As in the House, some support for the bill was lukewarm as legislators are hearing a strong desire for property tax reform from their constituents.

“One of the things I’ve learned about the legislative process is sometimes you don’t get everything you want in a bill,” said Sen. Jim Guthrie, R-McCammon.

Sen. Jim Rice, R-Caldwell, referenced figures in the 2022 Idaho Public Policy Survey by Boise State University’s School of Public Service, which asked “which type of tax should be reduced to provide the most help to Idahoans during this time?” 

37.7% of respondents said property tax and 37.4% said income tax, a four point increase for property taxes and a five point decrease for income taxes since last year’s survey.

“Our citizens, when looking at the surplus we’re running, they want two types of tax relief, primarily property and income,” Rice said. “This gives them the income tax relief.” 

Before debate opened, Sen. Christy Zito, R-Hammett, moved to send the bill to the Senate’s amending order. She said she wanted to alter the bill to include repealing the sales tax on food, also known as the grocery tax. 

“As I travel our state and I talk to people and I get emails, for years now, this is the most consistent topic of discussion,” Zito said. “This is the most consistent ask from the people of this good state.” 

That motion failed on an 8-26 vote, with only Zito and the Democrats voting in favor. 

“If you get rid of the credit, people are going to get an increase in taxes,” said Senate President Pro Tem Chuck Winder, R-Boise. “They just don’t understand it. The proper move is to increase the credit.”

The legislature passed a bill to repeal the sales tax on groceries in 2017, but it was vetoed by then-Gov. C.L. “Butch” Otter. 

Gov. Brad Little has typically said he would sign a bill to repeal the grocery tax, if lawmakers were ever able to pass one. In an AARP call that coincided with the Senate debate, however, he sounded less supportive, echoing concerns from Winder and other Republicans who have opposed the move.

“There’s a lot of families in Idaho that, now with the rebate they get, are money-ahead on what they pay on groceries,” Little told a caller who inquired about eliminating the grocery tax. 

He then referenced a bill introduced by Vick earlier in the day that would increase the tax credit from $100 to $120 for most Idahoans, and from $120 to $140 for seniors, saying it would be more simple to implement than defining what constitutes groceries for tax purposes. 

“You go into a grocery store and hot chicken is not tax exempt, but cold chicken is, and it’s a definition of whether you have it under the heater or you put it in the freezer,” Little said. “It’s a great way to create jobs for lobbyists for groceries to lobby for more exemptions.”

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