Idaho House Speaker Mike Moyle announced that a series of tax cut bills would be coming soon. The first bill is to reduce the income tax (HB 40) and in the coming days, there will be proposals to reduce the sales tax and local property tax burden.
Speaker Moyle tweeted: “Big news for Idaho taxpayers: Today’s bill delivers more than $252M in tax cuts, starting with cutting individual and corporate income taxes to 5.3%. It exempts pensions for working military retirees and eliminates capital gains on gold & silver. This is just the beginning!”
Moyle further mentioned the need for Idaho to remain competitive with the ongoing income tax changes in neighboring states. Montana is considering an income tax reduction this year from 5.9% to 4.9%, leap-frogging Idaho’s current 5.695% rate. Utah’s income tax is at 4.55% while Nevada and Wyoming don’t impose an income tax.
Here is the statement of purpose for HB 40: “This legislation reduces state government’s income tax burden, allowing Idahoans to keep more of their own hard-earned money. First, it reduces Idaho’s flat income tax rate on individuals and corporations from 5.695% to 5.3%. Second, it expands Idaho’s income tax exemption on U.S. military pension income to include certain disabled veterans under age 62, all veterans aged 62-64, and undisabled veterans under age 62 who are also employed and earn sufficient income to owe federal income taxes. And third, it removes capital gains and losses for both precious metal bullion and monetized bullion from the calculation of state income taxes.”
Another tax relief idea for lawmakers to consider is using automatic triggers to reduce income tax rates based on revenue growth. This is one of the recommendations in our Policy Manual. For example, Indiana lawmakers are currently considering an automatic trigger to reduce its income tax: “Indiana’s individual income tax rate will go down to 2.9 percent in 2027, the third lowest rate in the country for states with an income tax. Sen. Travis Holdman’s (R-Markle) bill would automatically lower the tax rate further by 0.05 percent every even-numbered year, beginning in 2030 — but only if state revenues grow by at least 3 percent in the previous even-numbered year.”
It is very exciting to see HB 40 include plans to eliminate income tax liability for most military retirement pay. Exempting military retirement pay from income taxes was one of the recommendations made last year by one of our Sawtooth Leadership Academy students. Christopher Sheftic, a freshman at Moscow High School, did his Sawtooth Leadership Academy research project on: “Growing Idaho’s economy by exempting military pensions from taxes.”
From Christopher’s Sawtooth research paper: “Idaho should consider fully exempting its income tax on veteran retirement pay so that it can attract more military retirees … Veterans bring significant federal benefits to Idaho when they retire here and proceed to send their children to local colleges or universities, start new businesses and create jobs, fill jobs in the private or public sector, and grow the state tax base. The Gem State should strive to join the veteran-friendly parts of the country while reaping the benefits.”
Speaking of our Sawtooth Leadership Academy, we are now accepting applications for the 2025 program. Not only could your student’s research paper result in a legislative recommendation like Christopher’s, but $8,000 in scholarships are available. Additional details about the Sawtooth Leadership Academy are available here.
As for HB 40, by further reducing the income tax burden and the economic drag these types of taxes create, lawmakers can put families, businesses, and Idaho’s economy in a strong position for the best overall tax climate for success.
Jason Mercier is Vice President and Director of Research of Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming. Online at mountainstatespolicy.org.
