House Bill H0311
2015 Freedom Index Score: (+2)
Analyst: Parrish Miller
Date of analysis: March 26, 2015
ANALYST'S NOTE: House Bill 311 makes several significant changes to Idaho's taxes, specifically to the
income tax, sales tax, and motor fuel tax. It lowers the top income tax rate to 6.7 percent and creates a
flat 6.7 percent income tax for all filers above certain thresholds. (Individuals under those thresholds will
see no change in their income tax rates.) The bill also eliminates the sales tax on groceries—which are
defined as SNAP-eligible items—and partially offsets this elimination by repealing the $100 per person
grocery tax credit. Finally the bill increases the motor fuel tax (paid on gasoline and diesel fuel used in
motor vehicles) from 25 cents a gallon to 37 cents a gallon.
The bill makes a few more minor changes to Idaho code as well such as requiring that any motor fuel in
inventory on the last day of the 25 cents-per-gallon rate will be subject to a "floor stock tax" of seven
cents per gallon. The seven cent motor fuel tax increase will be distributed to the highway distribution
account to be appropriated at a rate of 60 percent to the state highway account and 40 percent
according to the provisions of subsections (1) through (7) of section 40-709, Idaho Code.
Another change guarantees that jurisdictions benefiting from "revenue sharing" under Section 63-3638,
Idaho Code, will receive at least as much in future years as they did in fiscal year 2015. This provision will
sunset on November 1, 2018.
The bill is positive in its totality although certain components such as the increase in motor fuel tax are
negative. The bill will serve to lower taxes for Idahoans overall, though, especially in future years. Some
of the reasons for this include the fact that as food prices increase, the positive impact of the
elimination of the sales tax on groceries increases correspondingly. Conversely, as fuel prices increase
and vehicles become more fuel efficient, the relative impact of a flat, per-gallon tax decrease.
Point No. 5 — Does it directly or indirectly create or increase any taxes, fees, or other assessments?
Conversely, does it eliminate or reduce any taxes, fees, or other assessments?
ANALYSIS: House Bill 311 modifies Section 63-2402, Idaho Code, to increase the tax on motor
fuel from twenty-five cents to thirty-two cents per gallon. It further modifies the section to
require that "when the tax rate imposed on motor fuel subject to the tax in this chapter is
changed, the motor fuel in inventory on the last day of the old rate is subject to a floor stock tax.
The floor stock tax is the difference between the old rate and the new rate. The floor stock tax
will be reported and paid by Idaho licensed distributors as prescribed by the state tax
commission." The impact of this tax increase is estimated to be $42.5 million in higher taxes for
FY16 and $65 million in higher taxes for FY17 and each year thereafter. [Page 1, lines 35-37;
Page 2, lines 37-42] (-1)
ANALYSIS: House Bill 311 modifies Section 63-3024, Idaho Code, to stipulate that "for taxable
years beginning on or after January 1, 2015, and each taxable year thereafter the tax rates in
subsection (a) of this section shall apply only when Idaho taxable income as defined in this
chapter is less than four thousand dollars ($4,000) as adjusted in subsection (a) of this section.
All other Idaho taxable income as defined in this chapter shall be taxed at the rate of six and
seven-tenths percent (6.7%)." While this change will increase taxes for some people, the overall
impact of this change is a tax reduction. Additionally, moving to a fairer, flatter tax creates a
better and more stable environment in which to live, work, do business, and raise a family. (+1)
ANALYSIS: House Bill 311 creates Section 63-3622VV, Idaho Code, to declare that "there is
hereby exempted from the taxes imposed by this chapter the sale of food sold for human
consumption. The types and kinds of food products eligible for exemption by this section shall
be the same types and kinds of food products that are eligible for purchase with benefits
provided under the federal supplemental nutrition assistance program (SNAP) and do not
include restaurant sales of food."
House Bill 311 repeals Section 63-3024A, Idaho Code, which is the section of code dealing with
the grocery tax credit. This $100 per person income tax credit ($120 for those over 65) is
designed to help offset the sales tax paid on groceries, but does not cover the amount of tax
actually paid on groceries for many Idahoans. The net effect of exempting groceries from sales
tax and repealing the grocery tax credit is a significant tax cut for most Idahoans. (+1)
Point No. 7 — Does it increase government spending (for objectionable purposes) or debt? Conversely,
does it decrease government spending or debt?
ANALYSIS: House Bill 311 decreases income and sales taxes while increasing gas taxes. One
impact of this change is to reduce the amount of money flowing into the state's general fund—
the main pot of money from which the state makes many and sundry appropriations—and to
increase the amount of money flowing into the states dedicated fund for transportation—roads,
bridges, etc. Until such time as transportation funding is moved into the general fund where it
can compete head-to-head against less worthy expenditures, this change serves to reduce the
amount of money available for appropriation to questionable or objectionable causes and to
increase the amount of money available for duties more closely aligned with the proper role of
government. House Bill 311 has a significant potential to decrease objectionable spending and
to increase appropriate spending by the state legislature. (+1)