“In addition to these permanent income tax rate reductions totaling approximately $150 million annually, the legislation proposes an additional individual income tax rebate of approximately 10% of a taxpayer’s 2020 Idaho income tax liability or $300 per single filer and $600 per joint return, whichever amount is greater,” Loughead added. This tax package would make Idaho, a state with one of the fastest growing economies and among highest in-migration rates in the nation, even more attractive to individuals, families, employers, and investors. HB 1, which Little will soon sign into law, will also cut Idaho’s corporate tax rate from 6% to 5.8% and result in the third round of taxpayer rebates in the past two years.
“It would also inadvertently create a tax cliff, increasing tax liability by more than $1,300 with one additional dollar of income, and expose an increasing number of Idahoans to the 10.925% top rate each year due to an inverted inflation adjustment formula that would reduce, rather than increase, the income level at which the top rate kicks in each year.”
1, through a series of drafting errors, would increase taxes for nearly all Idahoans by reversing the income tax cuts that took effect earlier this year,” Loughead added. “In addition to creating the highest income tax rate between New York and California, Prop. “While the proposed structural reforms are economically beneficial in their own right, the bill’s effective date-January 3, 2023-would ensure these reforms supersede and reverse the effects of a tax increase ballot measure that, if adopted, would take effect on New Year’s Day,” writes Katherine Loughead, senior policy analyst at the Tax Foundation, about the benefits of HB 1. Even if Proposition 1 were to pass, enactment of HB 1 during the September special session will ensure taxpayers are held harmless. Proposition 1, if approved, would establish a new top income tax rate of 10.925% assessed on income above $250,000 (single filers) and $500,000 (joint filers).
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