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Who pays the highest tax rate in Idaho? Someone making $11,761 a year in taxable income
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Who pays the highest tax rate in Idaho? Someone making $11,761 a year in taxable income

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Idaho Capitol Boise

The dome inside of the Idaho Statehouse, looking up through the rotunda. 

BOISE — If you’re making $11,761 in taxable income a year in Idaho, you pay the same percentage of your income to the state as the richest man in Idaho. That would be Frank VanderSloot, whose wealth Forbes currently estimates at $3.5 billion.

That’s because in Idaho, residents qualify for the highest income tax rate if they make more than $11,760 in taxable income a year — for 2020, they will have to pay 6.925% of their earnings above that amount, according to the Idaho State Tax Commission. Married couples qualify for the highest rate at $23,520 a year.

And if you’re making between $7,840 and $11,760 in taxable income a year, you pay the second-highest income tax rate at 6.625%.

Now, Rep. Steve Harris, R-Meridian, wants to lower income and sales taxes. His new bill introduced Tuesday would drop the highest income tax rate to 6.5% — more than a 0.4% drop. The sales tax would also shrink, to 5.3% from its current 6% rate. Harris said it would provide $284 million in tax relief a year.

Harris’ bill wouldn’t change the income brackets for the state’s tax rates. But it would disproportionately provide more tax breaks for higher income earners compared to the poorest households — reducing more income tax for the highest earners.

His measure competes with another tax reduction plan that would remove the sales tax on groceries, one that Gov. Brad Little said he would support during his State of the State address. Harris said his bill would offer more tax relief than the groceries exemption.

It would eliminate the grocery tax credit, essentially raising the tax on food. It would also keep the sales tax on groceries, but that sales tax would be reduced to 5.3% like all other taxable items.

“This in my mind is satisfying a removal of grocery tax on food,” Harris said at the committee hearing on Tuesday.

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Idaho residents with nearly no income — making less than $1,568 a year in taxable income — would still have to pay 1% of anything above that amount toward taxes, a small drop from the current 1.125% rate. Someone making between $1,568 and $3,136 a year in taxable income would pay 2.8% instead of 3.125%.

Income tax rates would be retroactive to Jan. 1, 2021, while the new sales tax rate would kick in Jan. 1, 2022. The bill would not change the salaries used to determine income brackets.

A plan to exempt the sales tax on groceries

A grocery sales tax exemption would offer the same sales tax exemption to every Idaho resident. Effectively, it would affect the lowest earners the most — those who pay a larger percentage of their income toward the sales tax on groceries, and spend less money on other items that have sales taxes.

Rep. Ron Nate, R-Rexburg, said Harris, who chairs the House Taxation and Revenue Committee, has not allowed that bill to be introduced. Harris couldn’t be reached for comment Tuesday.

“I can’t imagine why a sitting chairman would not allow the committee to hear all options on the table,” Nate said by phone Tuesday. “This year presents a great opportunity to lower taxes for all Idahoans. The grocery tax repeal bill would do just that.”

Last year, Republican House Speaker Scott Bedke introduced the same bill that would exempt groceries from the sales tax. But this year, he and House Majority Leader Mike Moyle, R-Star, are backing Harris’ bill over Nate’s. Bedke and Moyle didn’t immediately return requests for comment Tuesday.

House Assistant Minority Leader Lauren Necochea, D-Boise, said a family with a modest income wouldn’t spend enough on taxable items to come out better off under Harris’ bill.

“What’s striking about this bill is how much of the benefits go to the highest income households and profitable corporations,” Necochea said. “This bill actually eliminates the grocery tax credit that every Idahoan can access to pay for these income tax rates that are going to overwhelmingly benefit the people who need the least help.”

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