The Idaho House fast-tracked a bill Monday that would raise the gas tax, eliminate the sales tax on groceries and overhaul Idaho’s income tax structure.
Republicans backing the bill argue it would make Idaho’s tax system fairer, provide funding for highways and make the state more competitive with neighboring states, including Washington, that don’t have income taxes.
But Idaho’s Democratic representatives blasted the bill.
“This bill is a tax hike and is very irresponsible,” Rep. Elaine Smith: said.
“It’s dressed up in a shell game -- a financial circus,” Rep. John Rusche added.
“If this theory were right … then Mississippi and Alabama would be the economic stars of our nation,” Rep. Ilana Rubel.
The three Democratic representatives said moving toward a flat tax of 6.7 percent would benefit the wealthiest Idahoans while while raising taxes for middle income earners.
Democrats also said the bill would ultimately reduce state revenue for education, forcing local communities to raise property taxes to fund districts.
But the sponsor of the bill said lower taxes for top earners would make Idaho more attractive to business owners and ultimately increase the amount of money the state takes in.
“Idaho is not going to have more money for schools if you don’t grow the economy. You’ve got to be competitive and grow the economy. This bill does that,” bill sponsor Rep. Mike Moyle said.
He said of the six states surrounding Idaho, only Oregon has a higher income tax rate.
The bill would also increase the gas tax by 7 cents per gallon -- the first increase in nearly 20 years. And it would make groceries in Idaho sales tax-free, while eliminating the grocery tax credit.
An analysis by the Idaho Center for Fiscal Policy found the combination of changes would result in a tax increase for most people in the bottom 80 percent of Idaho’s income distribution. The center said, for example, that Idahoans earning between $38,900 and $61,000 a year would pay on average $192 more annually.
The proposal would combine the upper income tax brackets that now pay 6.1, 7.1 and 7.4 percent into one bracket and have them all pay 6.7 percent.
The House passed the measure 53-17. It now moves to the Senate.