Idaho governor, lawmakers eye tax cuts with budget surplus

BOISE (AP) — With the state sitting on a pile of cash, Idaho Republican Gov. Brad Little and Democratic and Republican leaders in the House and Senate talked tax cuts on Friday, but also prudence.

Little and lawmakers spoke at the Idaho Press Club's 2022 Legislative Kickoff about what to expect when the legislative session starts Monday.

State budget analysts say Idaho has a record $1.6 billion budget surplus, and Little hinted he will suggest tax cuts in his State of the State address on Monday.

Republicans last month publicly discussed plans for a $400 million tax relief package to be introduced this session. Republican lawmakers last year passed roughly $400 million in tax relief that Democrats said mainly benefitted the wealthy.

Budget analysts attribute some of this year's surplus to billions of federal coronavirus relief money Idaho has received that will eventually dissipate from the economy. That means ongoing tax cuts based on the surplus could in future years lead to cuts in services or a tax increase.

"We're cognizant of it and we're aware of it, but there are not very many orange flags on our radar screen going forward," Little said. "But that still doesn't mean we shouldn't be prudent and careful."

Idaho's economy is strong with one of the lowest unemployment rates in the nation at 2.6%. It's also among the nation's fastest-growing states with more people choosing to live in Idaho, which is also bolstering the economy.

Lawmakers also talked tax cuts but disagreed between cutting property tax, income tax or eliminating the grocery sales tax. The state also has infrastructure needs that cost money.

"Any tax relief is going to be perceived by the public in a good way," said Republican Senate President Pro Tem Chuck Winder. "It's interesting that some of the public is saying, 'No, I don't really want tax relief. I'd rather see you put the money into roads and schools and do the deferred maintenance things that need to be done to keep our state and our universities and colleges running properly.' So that's going to be the debate — how best to do that."

But he predicted "significant tax relief, one way or another."

Democratic Rep. James Ruchti said priorities for Democrats included affordable child care, affordable housing and property tax relief.

Democrats also favored eliminating the grocery sales tax, a hot topic in the Legislature for several years.

"It is the kind of tax relief that everybody gets, whether you're rich, poor, or everywhere in between," said Democratic Sen. Grant Burgoyne. "There are people in Idaho who are struggling. They do not enjoy much in the way of income tax relief because they don't pay much in income taxes, and this would be a way to help them."

But Republican House Speaker Scott Bedke said Idaho tax filers get a grocery tax credit that refunds taxes paid on groceries. He also said the state gets some $320 million from grocery sales tax, with $170 million sent back to Idaho taxpayers through the tax credit. That leaves $140 million the state wouldn't get.

He said people benefitting from eliminating the grocery sales tax would be people from out of state and those who don't file income taxes.

"I believe that our tax policy should always benefit hardworking, taxpaying Idahoans," Bedke said. He also said local governments would lose money from revenue sharing from the state's general fund if the grocery tax is eliminated.

Other topics discussed included an effort to pass legislation for full-day kindergarten, potential bills in the form of tax credits to help day cares, and more money for schools.

The Legislature met in November to wrap up business after the House never formally adjourned to end the 2021 legislative session. During three days, the House passed multiple bills to prevent vaccine mandates, but none made it through the Senate.

Those bills are likely to return this year.

Another hot topic that could be introduced during this year's session, that is also an election year, is critical race theory, a way of thinking about America's history through the lens of racism. Republican lawmakers have accused universities of indoctrinating students. Others see it as a non-issue raised during an election year to draw voters.