Despite earlier concerns, governor signs largest income tax cut in Idaho history

Carolyn Komatsoulis, Idaho Statesman

BOISE (Idaho Statesman) — Gov. Brad Little signed a $253 million tax cut into law Thursday, despite sharing his earlier concerns over the total amount of proposed losses in state revenue this year. It is the largest income tax cut in state history, according to a news release announcing the cut.

In his annual State of the State address, Little proposed $100 million in tax cuts. The Legislature responded by proposing more than four times that amount this session across three bills, including the income tax cut.

RELATED | Idaho Senate passes bill to cut income taxes, reduce state revenue by $253 million

“Idaho families and businesses need and deserve to keep more of their hard earned money,” Little said in a statement. “As we continue to deliver historic tax relief, we must ensure our budget balances as the Idaho Constitution requires.”

House Bill 40 is projected to lower state revenues by $240 million by lowering the income tax rate from just under 5.7% to 5.3%.

The bill also would expand an income tax exemption on military pensions and remove capital gains and losses on precious metals and monetized bullion when calculating state income taxes, according to its. Those two measures would together reduce revenue by another $13 million.

The biggest reduction in taxes will go to those paying the most, lawmakers have said.

“This is the people’s money, not ours in government,” House Speaker Mike Moyle, R-Star, said in a statement. “We are just getting started.”

Yesterday, an increase to the grocery tax credit from $120 to $155 starting retroactively for the 2025 tax year cleared the Legislature. It is estimated to cost the state $50 million in revenue, according to the bill’s statement of purpose.

The proposed change is now on Little’s desk for his consideration.

The House this week also passed a $100 million property tax cut bill. It awaits a hearing in the Senate Local Government and Taxation Committee.

Earlier this year, Little told reporters there could be an “economic shock,” from the coming policy changes at the federal level under President Donald Trump.

“We need to be light on our feet,” Little said, of the transition between the Biden and Trump administrations. “I think we’ve got to be careful.”

Little this year has already signed several significant bills, including to spend $50 million to create a school choice voucher program and a bill banning mask mandates.