Idaho special session aims for tax cut, education spending

BOISE, Idaho (AP) — Idaho Gov. Brad Little on Tuesday called a special session of the Legislature starting next week aimed at using part of the state’s projected $2 billion budget surplus for a record $500 million income tax rebate this year to help residents cope with increased food and gas prices due to inflation.

The Republican governor also proposed a tax cut of more than $150 million annually by creating a corporate and individual flat tax rate of 5.8% starting next year. The corporate tax rate is currenlty 6%, the same rate for the state’s highest income bracket. Under the bill, the first $2,500 of income for individuals and $5,000 for people filing jointly would be exempt from taxes.

Little wants to bolster K-12 public schools and post-secondary education with $410 million annually from sales taxes starting next year. Of the $410 million, $330 million is proposed for K-12 and $80 million for post-secondary education.

The proposed bill already has enough co-sponsors in the 70-member House and 35-member Senate to make it to the governor’s desk for Little’s signature. Significantly, among those co-sponsors are enough members in a House committee and Senate committee to make sure the bill moves to the floor of the respective chambers for a full vote by all members.

Little said the tax cuts will help Idaho residents deal with high prices, and that the education investments will help the state’s efforts to boost workforce development training during times of economic uncertainty.

“Folks, this is conservative governing in action,” Little told reporters at an event to announce the tax breaks that was held in a parking lot next to a gas station where motorists pumped gas. “Use the record surplus brought on by prudent management to provide immediate and ongoing record tax relief and make historic investments in education while cutting taxes.”

Language in Little’s proclamation calling the special session cites high inflation, currently about 8.5%.

“Idaho taxpayers and the education system are especially imperiled by the consequences of historic inflation,” Little’s proclamation stated.

Democratic Sen. Janie Ward-Engelking, a retired teacher and education advocate who took part in the news conference, is one of the bill’s dozens of co-sponsors.

“I have to look at what really works for children in this state, and we know that being 51st in the nation in per-pupil expenditures for kids is not good,” she said. “So this investment in education is huge to me.”

The Legislature, when it meets in regular session in January, will decide how to spend the education money, and it’s possible a new group of lawmakers following the November election could attempt to cut education spending by the $410 million in other areas.

“I’m trusting the governor,” Ward-Engelking said. “He said he will veto a bill that doesn’t increase education funding by this amount of money,”

Idaho is experiencing rapid population growth, but Ward-Engelking said many young people are leaving the state and that many of them college students. She said increased education spending could limit the departures.

Republican House Speaker Scott Bedke, who is running for lieutenant governor, told reporters Idaho residents could expect tax rebates relatively soon, possibly by the end of September.

“What this (bill) does is it signals that we support education going forward, and we recognize that inflation is hard not only on citizens but also on our businesses and our schools, and this gets direct help,” he said.

The special session is set to start on Sept. 1, ahead of the November election when all of Idaho’s 105 state legislative seats are up for election as well as the governor and other statewide elected officials.

Also on the ballot in November is an initiative called the Quality Education Initiative that backers have said would boost education funding by raising taxes on corporations and individuals making $250,000 or more annually. Backers say Idaho schools are badly underfunded and that the initiative would raise more than $300 million.

If passed by voters, it would take effect Jan. 1. However, if lawmakers in the special session approve the proposed bill and Little signs it, it would take effect Jan. 3, negating and replacing the initiative.

Little said there was no connection between the ballot initiative and the proposed changes in taxes and education funding. But he said he preferred the proposed bill to the ballot initiative because it would lower taxes instead of raising them.

Property taxes and grocery taxes, two prominent Idaho issues over the last several years, are not addressed in the bill. Little said the complexities involved with those taxes make them difficult for a special session aimed at returning money quickly to residents.

Republican Senate President Pro-Tem Chuck Winder, who supports the proposed bill, said there is still budget-surplus money remaining in the state’s coffers and that he expected property taxes and grocery taxes to be considered in the regular session in January.

“We’re still going to have over a billion dollars to deal with property tax,” he said. “I’m pretty sure the grocery tax issue will come back up. We’re going to have money to do different things and maintain our rainy-day funds.”

Little restricted the special session to the one topic only as he is allowed to do under the Idaho Constitution. But lawmakers could try to use the session to raise other concerns.

Little in February signed into law what was then the biggest tax cut in the state’s history — a combined $600 million that included a one-time $350 million in tax rebates and $250 million in permanent income tax reductions going forward for people and businesses. That’s on top of tax cuts in 2021, which combined with the tax cuts enacted earlier this year reached nearly $1 billion.

If the new tax rebates and cuts are approved, tax relief under Little would climb to more than $1.5 billion.

Also earlier this year, Little signed into law a K-12 education funding increase of $300 million, a 12.5% increase over the previous year and what was then the largest increase in state history.