Little signs record $600M income tax cut

MERIDIAN (AP) — Idaho Gov. Brad Little on Friday signed into law the biggest tax cut in the state's history, holding the signing ceremony at a software company in Meridian as a way to recognize the role businesses have played in the state's economic recovery during the coronavirus pandemic.

The $600 million cut includes a one-time $350 million in rebates and $250 million in permanent income tax reductions going forward for people and businesses.

"We think in government we had something to do with it," the Republican governor told about 100 workers at In Time Tec, including CEO Jeet Kumar. "It was entrepreneurs, it was businesses, it was workers who went out, created the wealth, created the jobs, created the prosperity."

Little was joined by Republican leaders in the House and Senate for the signing of the first bill to make it through the legislative process this session.

Backers say the tax cuts return money to the people who paid it. Opponents say the tax cuts mostly benefit the wealthy at the expense of essential government services such as education. The bill received no support in the House or Senate from Democrats, who generally said the money would be better spent taking care of neglected maintenance on education buildings around the state and catching up on a backlog of road and bridge repairs.

Little promoted the tax cut in his State of the State Address last month as part of his "Leading Idaho" plan that also includes a record $300 million education spending increase, plus spending $200 million ongoing for roads and bridges, the largest ever increase for transportation. Little calls the three objectives a trifecta.

"Those were all somewhat aspirational goals," Little said. "I just didn't think we'd get them all done at once."

The state has a projected $1.9 billion surplus, about 40% of the state's typical budget. It's being used for the $350 million in rebates.

Some lawmakers have expressed doubts about passing the tax cut first before the spending legislation. Far-right Republicans last year targeted education spending and succeeded in cutting higher education budgets.

But Little and leaders in the House and Senate expressed confidence they could shepherd the education and transportation funding bills through the process.

"I think there is general consensus that our success here in Idaho starts in the classroom, and we have to have a good teacher there that's well paid," said Republican House Speaker Scott Bedke.

Republican Senate President Pro Tem Chuck Winder said the state had the opportunity to "get a lot of things done that we didn't ever think we'd get the opportunity to do."

The $350 million tax rebate includes 12% of state income taxes returned for filers during 2020, or $75 per taxpayer and dependent, whichever is greater.

The permanent tax cuts reduce income tax rates, including dropping the top rate from 6.5% to 6% and reducing the number of individual income tax brackets from five to four.

People making more than about $8,000 and couples making more than about $16,000 are in the top tax bracket in Idaho, meaning Idaho income tax is essentially a flat tax with most paying the same rate.

Corporate income taxes under the bill would be cut from 6.5% to 6%. Backers of that cut said it would keep Idaho competitive with surrounding states in attracting businesses.

The ongoing tax reductions would be partially offset by $94 million per year from the Tax Relief Fund, which collects sales taxes on online purchases.

Kumar, In Time Tec's CEO, said half a percent cut didn't sound like a lot but actually was a big help to businesses.

The state "becomes a place where we can create an economic ecosystem, and having a company like us that can thrive and grow and make a difference," he said.

He said the company had 120 workers and was looking to push that to 200 over the next 18 months.

The $600 million tax cut is the second large tax cut in two years, following last year's $383 million cut that included $220 million in immediate one-time income tax rebates and $163 million in ongoing income tax relief.

"A great day in Idaho for sure," said Republican Rep. Steven Harris, one of the sponsors of the bill signed into law on Friday. "For families. For businesses. Tremendous."