Idaho Freedom Caucus: Idaho Taxes 101

Nobody likes taxes. The government takes money from what we earn, what we buy, and what we own. Like the Beatles sang 60 years ago:

If you drive a car I’ll tax the street

If you try to sit I’ll tax your seat

If you get too cold I’ll tax the heat

If you take a walk I’ll tax your feet

It’s true taxes can provide necessities we have grown accustomed to or services that benefit the majority. Few would likely choose to live in complete anarchy or a kingdom, where things like law enforcement, fire departments, and roads are entirely privatized and services are granted in a caste system. The debate, therefore, revolves around how much taxpayers should be expected to fund.

Governments have limited options for raising revenue. Taxation by definition changes behaviors, meaning whatever is taxed will be affected. They can tax productivity by taking money from paychecks or businesses, tax consumption by imposing charges on purchases such as cars, furniture, or groceries, or tax property based on the assessed value of homes.

We must understand taxes before we can reform them. State government is funded by tax dollars. Our general fund (that is, everything that is not funded by federal grants or dedicated funds) comes from two sources: income taxes and sales taxes. Income in Idaho is taxed at a rate of 5.8%, while purchases are taxed at 6.0%. (Alert: Property taxes fund local governments, not the state.)

Idaho receives grants from the federal government for specific purposes, such as free and reduced school lunches and Medicaid. About 40% of the most recent state budget (2024) came from federal funds, and that’s not free money! Those federal funds come from federal income taxes as well as inflationary money printing, which is a mortgage against our children’s future. We’ll talk more about that in a future article.

Other sources of revenue for the state government include corporate income taxes, and other minor taxes and fees.

Property taxes fund local government. If you’re a homeowner, check your property tax bill and you’ll see where your hard-earned money is being spent. Property taxes fund cities, counties, public schools, libraries, community colleges, fire departments, cemeteries, and more.

Every taxing district is overseen by an elected board of trustees, which means voters are ultimately responsible for how their property taxes are spent. Districts hold budget hearings throughout the summer, taking input from citizens, before passing a final budget for the next fiscal year.

Taxing districts are limited to a property tax increase of 3% per year. However, they can take more taxes if they did not raise them in previous years, as well as adding more taxes on new construction.

Reining in our government means controlling both taxes and spending. If we cut spending without cutting taxes, then that money simply goes into a surplus. After House Bill 292 (2023 Property Tax Relief), some of that surplus revenue goes back to taxpayers, but much of it is squandered and spent elsewhere.

On the other hand, if we cut taxes without cutting spending, that often just shifts taxes to other sources. A good conservative Legislature can do both — cut taxes AND cut spending.

Deciding how to spend your hard-earned money is the most sacred trust laid upon lawmakers. Members of the Idaho Freedom Caucus stand with the hardworking taxpayers of Idaho, working towards a goal of the best government for the least amount of money.

After all, it’s your state and your money!