Idaho lawmakers are talking behind the scenes about creating a flat-rate income tax and raising the sales tax, a proposal the non-partisan Idaho Center for Fiscal Policy says would increase taxes for everyone who makes less than $173,000 a year.
What’s being called an omnibus tax plan would get rid of Idaho’s graduated income tax which has rates as high as 7.4 percent. That would be replaced with a flat tax of 6.6 percent.
The plan also proposes raising the sales tax from 6 to 7 percent as a way to pay for roads, and it'd do away with the sales tax on groceries.
“We wanted to do this analysis because this proposal has so many moving parts," says Lauren Necochea, director of the Idaho Center for Fiscal Policy. "Some moved taxes upwards, some moved certain taxes for different groups downwards. So we wanted to find out what the combined impact was. The proposal has several components which in combination mean that taxpayers across the bottom 95 percent of the income distribution pay more on average.”
The policy center says the plan would mean people who make more than $427,000 a year would get on-average a $5,000 tax cut. But people who make between $38,000 and $93,000 would see their total state taxes go up by more than $300 a year. Idaho's median household income is less than $47,000 a year.
Repealing the grocery tax is often seen as a way to help low-income Idahoans, but the Idaho Center for Fiscal Policy says the overall sales tax increase would cancel-out that benefit and cause the lowest-fifth of Idaho earners to pay more in total sales taxes.
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