The Idaho income tax legislation that proposes a $20 U-Turn

For more than a decade, Idaho has built a national reputation as a low-tax, pro-growth state. Lawmakers simplified the tax code, lowered rates, and returned surpluses. Families benefited. Businesses invested. Idaho became a magnet for opportunity.

House Bill 782 marks a sharp turn away from that trajectory.

The proposal would raise Idaho’s income tax rate from 5.3% to 5.325% and repeal the Parental Choice Tax Credit — just months after families began applying for it.

Supporters of the bill point out that the rate increase is small. And for the median household, that’s true.

Idaho’s median household income is roughly $81,000. At 5.3%, that family pays about $4,293 in state income taxes. At 5.325%, the bill rises to approximately $4,313 — a difference of around $20 per year.

Twenty dollars likely won’t break many family budgets.

But that’s not really what this tax increase is about.

The modest impact on the average household makes the politics easier. The real revenue impact falls on higher-income earners and corporations, who would pay substantially more under an increased rate. Framed as a minimal adjustment for “ordinary families,” the change becomes politically defensible while significantly increasing the burden on job creators and investors.

That may appeal to some policymakers eager to “soak the rich.” But Idaho’s economic success has not come from targeting success — it has come from encouraging it.

Raising rates on high earners and businesses affects investment decisions, expansion plans, and hiring. Idaho’s competitiveness has been a key part of its growth story. Even small increases change the signal.

Tax policy is not just about math. It’s about direction.

For years, Idaho’s direction has been clear: lower, flatter, more competitive rates. That predictability attracted families and businesses from higher-tax states. When a state that has built its brand on tax restraint begins nudging rates upward — even slightly — it alters expectations.

Today’s quarter-tenth of a percent establishes a precedent. Once lawmakers move from cutting taxes to raising them, the psychological and political barrier has been crossed. The question becomes not whether rates will rise again, but when.

But the income tax increase may be serving another purpose: providing political cover to repeal the Parental Choice Tax Credit.

The bill pairs a rate increase and child tax credit extension with the elimination of the Parental Choice Tax Credit — a program enacted to give families more flexibility in directing their children’s education. The credit helps offset private school tuition and other qualifying educational expenses, empowering parents to choose the best fit for their children.

More than 6,000 Idaho families have applied since the program opened. That response demonstrates real demand.

Repealing the credit now would disrupt families who have already made decisions based on existing law. Some parents have enrolled their children in new schools. Others have signed contracts or adjusted household finances in reliance on the credit.

Public policy should not function as a bait-and-switch.

The structure of H782 makes the politics clear: extend one broadly popular tax provision, make a modest rate adjustment that appears small for the median household, and quietly eliminate the school choice credit.

But eliminating the Parental Choice Tax Credit will not go unnoticed — and it should not.

Idaho families value educational flexibility. They want options that meet their children’s unique needs. The credit does not dismantle public education. It does not force anyone to leave their local school. It simply allows families to keep more of their own money if they choose a different educational setting.

Pairing a tax increase with the removal of educational choice sends a troubling message: higher burdens, fewer options.

And the timing makes it worse. When government enacts a program, opens applications, and invites participation, families reasonably rely on that commitment. Abrupt repeal undermines trust — not just in this policy, but in the stability of Idaho’s governing philosophy.

If lawmakers believe adjustments are needed, they can debate reforms. But reversing course after families have already stepped forward is neither fair nor prudent.

Idaho’s growth and prosperity have been built on stability, predictability, and respect for family autonomy. Raising income taxes — particularly in a way that falls heavily on high earners and employers — while simultaneously eliminating a newly enacted parental choice program breaks with that tradition.

The $20 figure for the median family may make for convenient talking points. But the broader implications are far larger.

Direction matters.

Idaho should continue signaling that it rewards work, encourages investment, and trusts parents — not that it is inching toward higher taxes and fewer choices.