IDAHO HAS A $1.4 BILLION SURPLUS, BUT LEFTISTS STILL WANT TO RAISE YOUR TAXES
From Fred Birnbaum
Idaho’s state government is flush with cash, yet the leftist group Reclaim Idaho and its supporters still want to raise taxes on Gem State residents by more than half-a-billion dollars.
Before we get to that, we need to review Idaho’s financial position. And to say the Gem State is sitting pretty is definitely an understatement.
On June 30, Idaho closed its books on Fiscal Year 2022. The ledger showed a whopping surplus of $1.381 billion. For context, the FY22 General Fund appropriation came to $4.223 billion, so the surplus amounts to about one-third of the original state spending plan.
In short, Idaho has nearly $1.4 billion leftover from last fiscal year.
At the same time, Reclaim Idaho officially secured a ballot spot for its Quality Education Act, an initiative that would hike Idahoans’ taxes by at least $573 million. A good portion of the funds generated by this massive tax hike would pay for schools.
This tax hike makes zero sense. Let’s examine why.
Gov. Brad Little has boasted that he has made record investments in K-12 education already.
It’s a bit of an understatement.
The state appropriation, which does not include local money from property taxes, bonds, and supplemental levies, is up dramatically the last two years. The state appropriated $2.341 billion in FY21 for K-12 education. For the current fiscal year, FY23, the appropriation was $3.318 billion. Yes, that’s right: a $977 million increase in two years.
That’s a 42% increase in two years.
Why would anyone propose a tax increase for even more education spending when the spending over the last two years has increased by nearly a billion dollars?
Well, there’s more.
Idaho has reserve funds, also known as “rainy day” funds that act as a backstop or savings account should revenues fall short. The rainy day fund balance for the end of FY23 is projected to be $1.196 billion. That is on top of the $1.381 billion surplus. Within the $1.196 billion rainy day fund, there is a public education stabilization fund, and it is projected to be $202 million by the end of FY23.
So to summarize, Idaho has invested an extra $1 billion in education over the past two years, has an additional surplus of over a billion dollars, and reserve funds projected to be over $1 billion.
Why would anyone propose a tax increase, which is what the Quality Education Act does? It makes no sense unless you believe that education spending should be unlimited and the taxpayers fighting rising inflation shouldn’t get any of their money back.
The QEA ballot initiative, Proposition 1, contains a massive three-part tax increase that hits all Idaho income taxpayers. The corporate tax rate would increase by 33%, and the income tax rate for high earners would increase to 10.925%, which is 82% higher than the current top rate of 6%.
But the final issue is a product of the way the initiative was drafted. The measure reverts the tax cuts that were provided to Idahoans with House Bill 436 in the 2022 session. That bill cut and consolidated tax brackets for all Idaho taxpayers, reducing the top rate from 6.5% to 6%. The QEA will revert these brackets back to pre-tax cut levels. In other words, it will hike taxes for nearly every Idahoan.
The proponents claim that the initiative will increase income taxes by $323.5 million. They are wrong because they exclude the impact of rolling back the 2022 tax cut which provided $251 million of tax relief to all Idahoans. So when you add the two, you see that the tax increase would be at least $574 million. Why at least? Because revenues were up 23.7% this past year. So the estimates that add up to $574 million are out of date and likely understated.
If the QEA is approved by voters in November, expect a sky-high tax increase in 2024 on all businesses and individual taxpayers.