House approves $253 million income tax cut package, exempts some military retirement pay and bullion capital gains

The Idaho House of Representatives approved House Bill 40 on Feb. 3, a tax package the bill’s sponsor said would return more than $253 million to Idaho taxpayers by lowering the state individual income-tax rate and changing tax treatment for military retirement pay and precious-metal bullion.

Representative from District 22, the bill’s sponsor, told the chamber the measure would reduce Idaho’s individual income-tax rate from 5.695 percent to 5.3 percent, "putting a whole lot more money back into the hands and the pockets of Idahoans, to the tune of more than $253,000,000." The bill also would remove some taxation on military retirement pay and exempt capital gains on bullion, the sponsor said.

The bill prompted extended debate on the floor. Opponents argued the change represents a long-term, permanent revenue reduction enacted at a time of fiscal uncertainty and questioned whether the state will be able to meet future spending needs. The Representative from District 11 said lawmakers must look at the other side of the ledger and listed infrastructure, school maintenance, public defenders and emergency medical services among areas of need, citing a $5 billion backlog in ITD projects and other long-term obligations. The Representative from District 11 also cited analysis produced for the House indicating the package is part of a larger set of bills that could amount to approximately $4 billion in permanent revenue reductions over time.

Several members said the distribution of benefits would be skewed toward higher earners. The Representative from District 18 referenced an Idaho Center for Fiscal Policy estimate cited on the floor that 66 percent of the dollar value of the package would accrue to the top 20 percent of earners and that the typical family making $55,000–$92,000 would see an estimated $127 benefit, while a household making $150,000 would see about $264.

Supporters said the cuts will spur economic growth and make Idaho more attractive to families and retirees, including military retirees. Several members, including veterans, said exempting some military retirement pay would help recruit and retain service members.

Members debated a specific provision to exempt capital gains on bullion (gold and silver). Some members said U.S. constitutional language about gold and silver supported treating bullion differently; others said the bullion exemption created unfair advantages compared with investments that produce jobs, like real property and businesses.

After more than an hour of debate, the House voted to approve House Bill 40; the clerk reported 63 ayes and 7 nays. The House approved the bill’s title and will transmit the measure to the Senate.