In case you didn’t hear, Idaho lawmakers are on the verge of making some major reformations to the state’s tax code. As reported in the Idaho Statesman over the weekend, the plan has three main parts.

  1. Eliminate the grocery tax
  2. Reduce the income tax for the wealthy while increasing it for the poor
  3. Raise the state sales tax by one percent

The plan goes something like this. Number one will negate the effect of number two on poorer people. Meanwhile, number two will reduce taxes for top income earners, which, in conservative utopian theory, will make the state’s economy boom. Of course, when you add number three into the mix, it becomes pretty clear that the rich are getting a tax break on the backs of the poor.

This is the current situation in Idaho.

Idaho’s tax code disproportionally affects the poor.

What’s causing this disparity in the tax burden? Regressive taxes such as sales and excise taxes, which everybody pays at the same rate. The grocery tax is also a sales tax, however, the grocery tax has a rebate for poorer families. This does little to help families that are so poor they don’t receive a rebate, but it makes the tax somewhat more progressive than a standard sales tax.

Currently, Idaho’s regressive taxes are placing a higher tax burden on people who make less.

Idaho-Regressive-taxes-sales-and-gas

Regressive taxes tend to be favored by conservatives who argue that it’s only fair if everybody pays the same tax rate. After all, wealthy people buy more, which means they pay more in taxes.

But that’s a pretty compartmentalized way of thinking about the tax code. What truly matters is the relative tax burden and financial impact for each income group. Regressive taxes put a lighter burden on the wealthy, while disproportionately effecting poorer citizens.

On the other side of the spectrum are income taxes, which can be structured to create a more progressive tax code.

Idaho's-progressive-tax-income

Unfortunately, conservatives tend to oppose progressive tax schemes. Again, they see fairness in the percentage of income paid, not the overall impact it has on a person’s finances.

So to summarize, the three things Idaho lawmakers are proposing:

  1. Eliminate a semi-progressive tax
  2. Increase a regressive tax
  3. Turn a progressive tax into regressive tax

In other words, if you’re middle class or poor, lawmakers are targeting you.

For a normal state, this kind of tax “reformation” would be offensive. But for the state with the highest percentage of minimum-wage workers, it’s downright appalling.

 

 

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