Since 2011, Idaho tax revenue has increased by an average of 5.4% per year. This is strong growth in state revenues following the so-called “great recession.” Now, put this number beside the growth in state spending over the same period. The state’s spending (appropriations) from the General Fund are growing faster and have exceeded revenue growth in 6 of the last 7 years.
In the last 3 fiscal years, revenues have come in higher than projections. Clearly, Idaho does not have a revenue problem; it has a spending problem. We are over-taxing and then over-spending. It is time for tax reductions.
Compared to Idaho’s surrounding states, Idaho has a worse business tax climate than all of them. Five of our six bordering states rank in the top 10 for favorable business tax climate (Tax Foundation, 2016). Washington is at #17, and Idaho is the worst at #20 nationally. But there’s more. Five bordering states have only two of the three big taxes: sales tax, personal income tax, and corporate income tax. Only Idaho and Utah have all three, and Idaho has higher rates than Utah in all three.
So here we are. Revenues growing fantastically, and other states with more favorable tax structures. Because of our balanced budget requirement in the Constitution, in lean years, we can’t afford tax cuts; so prosperous years present the only opportunity to reduce tax rates and become more competitive. And, 2017 sure looks like the right year. Currently, we have $130 million more in the state coffers than we planned to have at this point.
Here’s my idea of a freedom-friendly, family-friendly, economy-friendly tax plan: Repeal the tax on groceries, reduce personal and corporate income tax rates to 7.0% over two years, and increase the property exemption to $200,000. All this can be done for an estimation of around $80 million less in revenues going forward. One income tax reduction bill has been introduced, H67, and that is a good start.
Some may complain about too much being “spent” on tax cuts. I disagree. We never “spend” on tax cuts. Reducing taxes is not spending…it’s the opposite…it’s actually NOT state spending. To have $80 million less in state revenue means Idahoans have $80 million more to spend themselves. I almost always prefer to have individuals with more money to spend rather than the state legislature with more money to spend. And, over time, the economic growth makes the tax revenue grow too. So the amount of “lost” revenues will most certainly be lower, and possibly non-existent.
Now is our prime opportunity to reduce tax burdens on Idahoans. Lowering taxes means more economic growth, more individual liberty, and less government encroachment. All good things in my book.