Will Idaho Inch Away From Gov’s “No New Taxes” Pledge?

For anyone still trying to get the taste of the Illinois tax hikes out of their mouth, the case of Idaho may prove a welcome palate cleanser. The state, which balanced its budget last fiscal year without raising taxes, may actually begin to reduce income tax rates starting in 2013. Via Joe Henchman at the Tax Foundation comes this excerpt from Gov. Butch Otter’s State of the State address:

When President Reagan signed the landmark Tax Reform Act of 1986 into law, he cited the need to secure Americans’ economic freedoms. He cited the need to “restore certainty to our tax code and our economy.” And he cited the fact that – as he put it – “ultimately the economy is not made up of aggregates like government spending and consumer demand, but of individual men and women, each striving to provide for his family and better his or her lot in life.”

With that in mind, I encourage you to seriously consider legislation being introduced by Representative Marv Hagedorn. His bill would equalize and then gradually reduce our marginal State income tax rates for individuals and businesses over ten years, starting in 2013. But whether it’s that bill or an alternative, we need a long-term plan for reducing the tax burden on our citizens. That will go a long way toward providing a competitive advantage for Idahoans, stimulating economic growth and expanding our tax base.

Good news all around. This comes on the heels of Gov. Otter’s pledge to balance the budget for the coming year without new taxes. Unfortunately, not everyone seems to be on the same page.

Rep. Dennis Lake (R) has announced he will introduce a cigarette tax hike proposal in the coming year, a bump that could very soon see Idahoans paying $7 per pack. The aim, claims Lake, is to improve public health while hopefully raising some $50 million in new revenues. Otter on raising tobacco taxes: “I’m not convinced – you’re going to have to convince me.”

It will be interesting to see if (and how) this showdown comes to pass. Idaho faces a $340 million budget shortfall, and needed $175 million in non-recurring emergency fund money to balance its budget last year. The temptation for “quick fixes” of a cigarette tax hike is understandable.