The golden opportunity to lower income tax rates, boost competitiveness in Idaho and Montana
Over the past few years, Idaho lawmakers have twice lowered the state’s income tax rate. The latest legislative action passed last September brings the Gem State’s income tax to a flat rate of 5.8% for all income levels.
Like Idaho, Montana lowered its income tax from 6.9% to 6.75% in 2022. Governor Greg Gianforte says there’s room for an even larger reduction. He has proposed lowering the top state income tax rate to 5.9%.
The reduction action in both Montana and Idaho follows a national trend of lowering state income tax rates. One of the only states not following the trend happens to be neighboring Washington, providing a golden opportunity for policymakers in Idaho and Montana to take advantage of an extraordinary policy shift and solidify their state competitiveness for decades to come.
Both Idaho and Montana’s current personal income tax rates are relatively high
Personal income tax revenue accounts for nearly half of state revenues in Idaho and nearly two-thirds in Montana
Policymakers can tie personal income tax rates to excess revenue via triggers, lowering the burden for all workers
In Idaho, every .1% of the state’s income tax accounts for roughly $40 million in revenue
Idaho and Montana stand to gain from Washington state decision to adopt a capital gains income tax