Senator Tim Corder: There has been interest in the question of which states tax what, and whether Idaho should do away with the income tax and increase the sales tax to compensate. There are those that would argue for the reduction of all taxes and the outright elimination of some out of frustration.
Oh, the good ole days when the unmarried schoolmarm taught in a one-room school and the dirt trail between cities was easily identifiable and perfectly acceptable for intermodal transportation. When the ruts in the road became too rough or the potholes too deep, folks just moved to a smooth place and there was no differential speed on the roads because the horses all traveled the same speed, more or less. It was the darned slow oxen that just messed up the whole deal – but I digress.
Let me get out in the weeds just a bit longer by suggesting that the “Fair Tax” is my favorite federal solution for equity, but because it was originally an idea proposed by a Democrat in Congress, it had little chance. I have posted a rerun of a 2007 article I wrote on the Fair Tax onwww.senatortimcorder.com if you are curious.
Back to the three taxes, or the more familiar, three-legged stool! There are really more than three legs when one considers the amount paid as excise taxes, but let’s focus on the three primary forms of taxes.
Idaho taxes income, wealth (property), and consumption (sales). The three, when balanced appropriately, have proven to provide stability and solid economic health for Idaho. I believe the three taxes should get the credit for economic stability even more so than the beloved constitutional balanced budget requirement, especially with all those reportable off-balance sheet contingent liabilities hanging on like leeches – but there I go in the weeds again.
Information compiled by the Federation of Tax Administrators offers these comparisons between Idaho and the neighboring states of Montana, Nevada, Oregon, Utah, Washington, and Wyoming. Among these states, Idaho and Oregon are tied for the lowest overall tax burden based on taxes per dollar of income and they are well under the national average.
Two of the seven states do not have a sales tax (Montana and Oregon) and Idaho enjoys the lowest sales tax burden of those that do. Washington, Nevada, and Wyoming are the highest.
Washington, Nevada, and Wyoming do not have corporate Income tax – see a correlation to the sales tax? The 2012 change in Idaho law will change that result a bit, but Idaho and Utah were nearly tied and Montana was the highest by a huge margin. Washington, Nevada, and Wyoming don’t have individual income tax either; again, notice the correlation with sales tax and remember that Wyoming has oil, Nevada has gambling, and Washington has multiple sales tax rates by locale, perhaps as high as 20 percent.
Each of the subject states has a property tax, but Idaho enjoys the lowest, based again on taxes per dollar of income. Wyoming is very high; next is Montana, Nevada, Oregon, Washington, and Utah. Then there are the sin taxes: cigarettes, wine, and beer. Each state differs on those.
Finally, and I use the word liberally, are the taxes on fuel, energy, mines, interest, insurance, estates, etcetera where each state differs.
The circle of tax life brings us back to the overall tax burden. Idaho is the best among our neighboring states and well below the national average. I understand we still pay too much, but when policy changes manipulate the rate of one of those taxes to provide for an advantage to a particular segment of our state, then the balance changes and there will likely be equal and opposite consequences to other segments of our society.
Maintaining tax balance is critical to stability and viability. Stability and viability minimize the risk of policy manipulation.