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BOISE — Two members of House leadership at the Idaho Legislature have put forward a multifaceted tax bill that would eliminate sales tax and the tax credit for groceries, establish a flat tax for upper-income earners and institute a 7-cent fuel tax increase. 

House Majority Leader Mike Moyle, R-Star, introduced the bill to the House Ways and Means Committee on Wednesday morning, and it received a print hearing before the House Revenue and Taxation Committee in the afternoon. The legislation is co-sponsored by Speaker of the House Scott Bedke, R-Oakley. It was introduced one day after representatives pulled a transportation bill sponsored by Reps. Greg Chaney, R-Caldwell, and Jason Monks, R-Meridian. It is estimated to raise $42.5 million in the 2016 fiscal year for transportation.

GROCERY TAX

The legislation, House Bill 311, would remove the sales tax from groceries and eliminate the grocery tax credit, which is $100 per year for most individuals and $120 for seniors. The sales tax would end Oct. 1, and the tax credit would effectively end for the tax year that started Jan. 1 this year.

The state would take an estimated $115 million hit in fiscal year 2016 by removing the grocery sales tax, but would recoup $141.5 million in the same fiscal year from getting rid of the tax credit.

FUEL TAX

The gasoline and diesel tax would go up 7 cents under the bill, from 25 to 32 cents per gallon. The increase would be distributed 60-40 between the state highway account and the highway distribution account, respectively. It also includes a one-time, $5 million distribution from the state refund account into the same accounts with the same spread.

The fuel tax revenue is estimated to be $42.5 million in fiscal year 2016 and $65 million in each year thereafter.

FLAT TAX

The proposal would also institute a flat tax for upper-income earners. Those with taxable incomes in the top tax tier would have income taxed at a lower 6.7 percent rate, versus the graduated rates that currently exist — up to 7.4 percent for the highest earners. Lower income tax rates would stay the same.

Moyle’s bill received three no votes in committee — one from an incredulous Rep. Mark Nye, D-Pocatello.

“As I read it, this is a tax increase proposal by the majority party?” Nye said. That didn’t sit well with him, as he said he campaigned on no new taxes.

Moyle said it is a tax increase in fiscal year 2016, but in fiscal year 2017 that would change to become a tax cut. He estimated the bill would result in a $15 million increase in general fund revenues in fiscal year 2016, which begins July 1. In the coming years, he said it would result in a substantial decrease.

“This bill does it all,” Moyle said. “It does provide new revenue for roads, it changes distributions to our local (highway accounts) … and at the same time it puts Idaho in a better place to be competitive with income tax rates.”

The committee voted to introduce the bill, and it should receive a hearing within the next week.

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