Idaho House passes tax cut and education funding bill in 2022 special session

Clark Corbin/Idaho Capital Sun

The Idaho Legislature’s 2022 special session got off to a quick start Thursday morning with the House Revenue and Taxation Committee only needing nine minutes to introduce a $1 billion bill to cut taxes and increase education funding. The Idaho House passed the bill on a 55-15 vote, and the legislation will now be taken up by the Idaho Senate.

The 14-page bill is the only bill on the agenda for the special session, which legislative leaders hope they can adjourn in a single day Thursday.

The bill does four things, said House Revenue and Taxation Committee Chairman Steven Harris, the Meridian Republican who presented the bill Thursday morning.

• It spends $500 million of the state’s record $2 billion budget surplus on tax rebates for all Idahoans who filed 2020 taxes. The rebates are for a minimum of $300 per individual or $600 per married couple who files jointly.
• It reduces the income tax rate from 6% to 5.8% and creates a new flat tax rate for all filers. It also exempts the first $2,500 of income for all filers.
• The bill transfers $330 million annually from sales tax collections to a K-12 public school fund.
• It directs $80 million a year to a new fund for in-demand careers, where the money could be directed to career-technical education programs, community colleges or four-year colleges and universities.

Gov. Brad Little called for the special session last week, saying the state should return a large portion of the state budget surplus to Idahoans who are facing high gas prices, high housing costs and inflation.

Harris served as one of the bill’s sponsors and said he agrees with Little’s rationale for calling the session.

“Why a special session?” Harris asked as he presented the bill. “From my point of view, we have a boatload of money that needs to be dealt with appropriately.”

The bill legislators introduced Thursday includes one change from the draft bill Little presented last week. The new bill does not include an automatic 3% increase in the money directed to K-12 public schools, which was put in to address inflation. One of Little’s aides told the Idaho Capital Sun that the 3% annual increase was not scheduled to take effect until the 2025 fiscal year, so there was no need to handle that this year during the special session.

Later Thursday morning the House Revenue and Taxation Committee voted to advance the bill to the House floor following a public hearing.

During an afternoon debate on the Idaho House floor, a handful of the more conservative Republicans in the House tried to derail the bill or separate the tax cut provisions of the bill from the education funding proposal.

Rep. Heather Scott, R-Blanchard, made an unsuccessful motion to suspend House rules.

Scott said schools have already received big funding increases over the past two years.

“I do not believe that our schools need another dime until we stop teaching critical race theory, until we remove the explicit sexual content from our libraries and the books in our libraries, I don’t feel comfortable giving any more money,” Scott said in floor debate.

Rep. Tammy Nichols, R-Middleton, also made an unsuccessful motion to send the bill out for amendments.

Some of the more conservative members of the Legislature voiced support for the tax cuts in the bill but opposed the increases in education funding. Others argued against the special session procedures, saying the Legislature needed to do more to assert its independence rather than follow Little’s lead.

“This bill and this entire process is very disrespectful to our Constitution, to our voters, to our taxpayers and to the incoming class (of legislators),” Rep. Judy Boyle, R-Midvale, said in floor debate. “We are telling them we do not trust them to make decisions, and we don’t want to listen to their ideas on what they think about school funding.”

On the other hand, Rep. Greg Chaney, R-Caldwell, said he supports the bill and was not swayed by other arguments alleging the bill is unconstitutional because it addresses more than one different subject.

“It seems like one subject to me, and that subject is revenue,” Chaney said on the floor. “This isn’t on the line, this is well inside the line.”

Rep. John McCrostie, a Garden City Democrat and public school music teacher, said Idaho schools have produced great results despite finding limitations. He said he supports the bill because schools across the state have teacher shortages and also struggle to recruit substitute teachers.

“If we continue to attack public education, we will not continue to see those types of results,” McCrostie said in his floor debate.

Rep. Laurie Lickley, a Republican from Jerome, said Idahoans are struggling with high costs and still support their local schools.

“My voters, my constituents, across the board are asking for help and I think this bill, House Bill 1 does that,” Lickley said.

In the end, the House voted 55-15 to pass the bill following a two hour debate.

Special legislative session comes less than 10 weeks before Idaho’s general election

Under the Idaho Constitution, only the governor may call a special session. There have now been five special sessions in Idaho since 2000, with special sessions occurring in 2000, 2006, 2015, 2020 and this year.

The timing and political implications of this year’s special session add another dimension to the tax policy and education funding issue before the Legislature.

All legislators are coming to the end of their terms, with all 105 seats in the Idaho Legislature up for election in less than 10 weeks in the Nov. 8 general election. Nineteen incumbent Republican legislators already lost their primary election races in May and more than 20 other legislators either didn’t run for re-election this year or ran for a different office.

If legislators pass the tax cut and education funding bill during the special session, the bill is designed to repeal and replace the Quality Education Act education funding initiative that will also be on the Nov. 8 general election ballot.

Reclaim Idaho organizers and volunteers gathered signatures to qualify the Quality Education Act for the Nov. 8 general election, saying their initiative would raise $323 million annually for K-12 education funding by increasing the corporate income tax rate from 6% to 8% and creating a new top income tax rate of 10.925% for individuals earning at least $250,000 per year.

Little’s aides have told reporters the special session bill is written so it would take effect Jan. 3, two days after the Jan. 1 date the Quality Education Act would take effect if voters pass it. Nevertheless, Reclaim Idaho co-founder Luke Mayville told the Sun last week that the organization will continue to promote the Quality Education Act because they are unsure if the special session bill would actually repeal and replace the Quality Education Act.

In the lead up to the special session, Sen. Janie Ward-Engelking, D-Boise, told the Sun that she feels legislators would not be considering such a large education funding proposal right now if it wasn’t for the Reclaim Idaho volunteers and the more than 70,000 Idahoans who signed petitions to get the initiative on the ballot.

Little has expressed a lot of public confidence that the special session bill has the votes to pass the Idaho House of Representatives and Idaho Senate. Little said he lined up bipartisan support and has support of a majority of legislators in both chambers and at the committee level.

Ward-Engelking said she signed on as a co-sponsor because of the education funding component.

“The reality is, my Democratic colleagues and I have pushed for increased education funding for years, and this is a way to get it done right now,” Ward-Engelking said last week.