Rich Idahoans pay smaller share of income in taxes than low-income families, report says
BOISE — Low-income Idahoans pay a larger percentage of their income in taxes than wealthy residents, according to a new report.
The latest edition of “Who Pays?” from the Institute on Taxation and Economic Policy found that Idaho’s tax system is regressive, meaning poor and middle-income families pay a disproportionate share of taxes, relative to their incomes, than their richer counterparts. The Institute on Taxation and Economic Policy is a nonprofit, nonpartisan research organization that favors a progressive tax system.
Families who make less than $27,700 a year spend an average of 12.8% of it on income and property taxes: $2,632 on income taxes and $914 on property taxes, the report said. In comparison, residents who earn over $471,300 a year pay 7.7%: $30,163 and $6,127, respectively.
Idaho is one of 41 states that tax the top 1% less than every other income group, and one of 34 states that tax their lowest-income residents at a higher rate than any other group, the institute said in a news release. Policies approved by the Idaho Legislature in 2018 have shifted the burden toward low-income families further, it said.
Idaho is among a dozen other states that tax income at one flat rate, the institute said, with a flat 5.8% individual income tax, except for the very lowest income earners — single people who bring in no more than $4,489 a year or couples who earn no more than $8,978.
May Roberts, policy analyst at the Idaho Center for Fiscal Policy, said lawmakers could ease the imbalance by enhancing a property “circuit breaker” tax credit, which credits property taxes that go beyond a certain share of income, according to the institute. Lawmakers could also implement an earned income tax credit, make the child tax credit refundable or increase the state grocery tax credit, the institute said.
The Idaho Center for Fiscal Policy is a nonprofit organization that also favors progressive taxation and says the Legislature has “doubled down on regressive tax policies in the past few years.”
Based on the assessed value of homes, low-wage families in Idaho pay more than double what the most well-off families pay in property taxes as a share of income.
The institute suggests creating a renter’s credit to alleviate some of the discrepancy.
“When you ask people what they think a fair tax code looks like, almost nobody says we should have the richest pay the least. And yet when we look around the country, the vast majority of states have tax systems that do just that,” Carl Davis, director of research at the Institute on Taxation and Economic Policy, said in the news release. “There’s an alarming gap here between what the public wants and what state lawmakers have delivered.”