BOISE, Idaho — A new state study shows Idaho’s overall taxes are the lowest in the region and rank 48th in the nation.
The Spokesman-Review reports the annual Tax Burden Study, which the Idaho State Tax Commission has prepared each year since the 1970s, shows that Idaho’s total state and local tax burden per person ranks 48th among the 50 states plus the District of Columbia, and falls 29.6 percent below the U.S. average. It’s the lowest among 11 Western states.
The state’s tax burden relative to income – an important difference because Idaho incomes are much lower than most states -l ranks 37th nationally and 10th among the 11 Western states. It comes in 11 percent below the national average.
Idaho politicians, including Gov. Butch Otter and all three of the leading GOP candidates to succeed him in next year’s election, are calling for cutting Idaho’s personal and corporate income tax rates. 1st District GOP Rep. Raul Labrador, a candidate for governor, has made it a standard stump line on the campaign trail to claim that Idaho has “the highest taxes of any of our neighbors.”
However tax rates alone don’t tell you how much people are paying. And in Idaho, where the top personal income tax rate is 7.4 percent, taxpayers are actually paying less in state income tax than in Utah, where the top rate is 5 percent. That’s because the two states’ income taxes are structured differently, both in how they define taxable income and in their deductions and exemptions.
“That’s the problem with looking at the tax rate instead of the effective rate,” said Jasper LiCalzi, a professor of political economy at the College of Idaho. “Just looking at the raw rate is quite misleading. You have to look at the effective rate: What do people pay?”
Not only does Idaho’s overall tax burden rank much lower than its neighbors and nearly every state, those rankings have barely changed since the study’s been compiled each year over more than three decades.
In 2015, the state raised 28.1 percent of its overall state and local tax revenue from property taxes; 29.8 percent from income taxes, both individual and corporate; and 25.8 percent from sales taxes.
For individual income taxes, Idaho ranks 33rd in the nation per capita, 22 percent below the national average. For income taxes per $1,000 of personal income, Idaho ranks 27th, 1.4 percent below the national average. Utah was 26th per capita, and 16th per $1,000 of personal income.
Washington, by contrast, has no personal income tax. But its overall tax burden per resident ranked 18th in the nation in 2015; compared to its residents’ incomes, the burden ranked 35th.
In 2015, Idaho’s personal income was among the lowest in the nation at 49th; Washington’s ranked 13th, while Utah’s was 46th.