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A newly revised financial analysis released Wednesday found that Reclaim Idaho’s updated education initiative complies with a new tax bill passed by lawmakers earlier this year.
Overall, the initiative would increase income taxes by $ 323.5 million from budget year 2024.
The financial management department issued the financial implications statement late Wednesday afternoon, clearing the confusion about how much the proposed initiative would cost and generate.
The initiative, which would increase funding for K-12 education, sticks to the last tax cut passed by lawmakers this year, and then creates a new top tax bracket of 10.925% for those over 250,000, according to a copy Earn US dollars per year from the tax impact statement received from Idaho Capital Sun.
The education initiative also increases corporate tax to 8% versus the new tax law, which sets the corporate tax rate at 6.5%.
The Financial Analysis Department also noted that the initiative would reduce the state’s general fund by $ 661,200 in fiscal year 2024.
The initiative ran into a catch earlier this week when the state, as required by law, published the first tax declaration. Idaho Capital Sun reported that the tax impact statement was inconsistent with the updated language of the voting initiative.
Reclaim Idaho officials filed a request with the Idaho State Department for a revised tax impact statement Tuesday afternoon. Secretary of State staff then presented the updated ballot initiative language to the financial management department to complete the analysis, known as the Tax Impact Statement, Assistant Secretary of State Chad Houck told the Idaho Capital Sun late Tuesday afternoon.
As a result of this issue, Houck said the Secretary of State’s office changed one of its policies and will urge lawmakers to consider changing Idaho law to avoid similar problems in the future.
Houck and Reclaim Idaho co-founder Luke Mayville said they are glad that all sides are coming together to quickly find a way forward. It took the State Department, Finance Management, and Reclaim Idaho less than two days to work together to find a solution.
“We are excited to work with the State Department and Financial Management Department to resolve this issue,” Mayville said in a written statement Tuesday.
How did the topics of the election initiative come about?
The issue is a ballot initiative that Reclaim Idaho officials hope will be voted on in Idaho in 2022.
Reclaim Idaho, the grassroots organization behind Idaho’s 2018 Medicaid expansion initiative, submitted the Voting Initiative on the Quality Education Act to raise funds for the Idaho K-12 public school system by increasing corporate tax rates and increasing taxes for individuals who are more than 250,000 Earn US dollars.
Originally, Reclaim Idaho organizers announced that the Secretary of State’s office last week gave them the go-ahead to start collecting signatures. But they stopped collecting signatures after Jair Carrero, an electoral specialist for the State Department, emailed them to warn them of the need for a fiscal impact statement.
A law passed by the Legislature in 2020 requires that voting initiatives include an independent tax impact statement prepared by the Financial Management Department.
“The information to proceed (collecting signatures) received from the foreign minister’s office was premature,” Carrero wrote in Friday’s email.
The financial management department released a tax implication statement Monday afternoon for the original Reclaim Idaho ballot language, as described in Idaho law.
But Reclaim Idaho had updated its ballot papers based on the passage of a new law, House Bill 380, passed by the Legislature earlier this year, that made several changes to income tax brackets and rates.
That meant the tax implication statement was inconsistent with the new language of choice that Reclaim Idaho was using in its signature collection campaign.
As a result, the financial impact statement showed that passing the voting initiative would cost the average taxpayer about $ 400, which was not what Reclaim Idaho officials wanted.
What caused the confusion?
The Secretary of State’s office attempted to send a letter to the Financial Management Department on April 29, requesting a tax implication explanation for Reclaim Idaho’s educational voting initiative. The letter came back undeliverable. This shipping error ultimately led to the timelines for reviewing the voting initiative for two different parts of the state government getting out of step, Houck said.
“One hundred percent, all right,” said Houck when asked if the letter’s failure to deliver was responsible for most of the confusion. “It was breaking those synchronous timelines.”
In other words, two separate government reviews now went in different ways.
While the financial management department was responsible for the tax statement, the Idaho Attorney General issued a separate certificate of verification of the voting initiative described in Idaho law. This process includes reviewing the initiative for form and style and what the state calls “substantial meaning” and recommending revisions or changes.
Mayville said the attorney general’s office review marked the passage of House Law 380, which changed income tax laws and brackets. This bill was tabled on April 21st, days before Reclaim Idaho filed its April 28th ballot initiative, but it wasn’t passed and enacted on May 4th. The new law also had a clause that it would go into effect retrospectively on January 1, 2021, while a typical new law would not come into effect until July 1.
Based on the AG review, Reclaim Idaho officials made changes to the voting initiative to reflect the passage of the law. One of the biggest changes Reclaim Idaho made was to reduce the number of tax brackets in their initiative from seven to five, in line with House Bill 380, and then add a new tax bracket for individuals who have more than 250,000 U.S. Earn dollars.
However, the Foreign Minister’s letter requested an explanation of the tax implications in the originally submitted ballot language, not the updated language.
Houck said that state officials and organizers from Reclaim Idaho were in an unusual position because the law does not regulate what happens when election initiative organizers make changes after a certificate of verification from the attorney general. The law only stipulates that the Foreign Minister must “immediately send a copy of the petition” to the Financial Management Department in order to complete the tax implications statement.
Houck pointed out that the financial management department followed Idaho law and did nothing wrong. The department forwarded the tax implication statement in initiative language, which the Secretary of State’s office sent to the department “immediately” the day after Reclaim Idaho submitted its original ballot initiative on April 28th.
Alex Adams, administrator of the financial management department, said this was the seventh tax impact statement the department has made since the 2020 law came into effect.
“Although time consuming, I take pride in the work of our state economists in using the best available evidence to produce accurate financial reports within the legally mandated deadlines,” said Adams in a written statement Monday afternoon. “We believe these fiscal impact statements will help voters consider the merits of future initiatives.”
The Idaho Secretary of State is changing policy
Houck told the Idaho Capital Sun that the Secretary of State’s office is no longer sending requests to the Financial Management Department for a tax impact statement as the letter was returned undeliverable.
“That’s why we deliver all of these by hand,” said Houck.
He said the foreign minister’s office made the policy change “as soon as we get one back (undeliverable)”.
“It’s the only time that it has ever happened,” said Houck. “At that point we had no idea what would ultimately lead to this conversation where we are now.”
Houck also said the foreign minister’s office would recommend lawmakers review laws dealing with tax impact declarations. The law does not address what happens if the two review deadlines are exceeded and there is “no clear indication” to issue a new tax impact statement if the ballot language is updated or revised.
“That is definitely something that we have to look at from a legal point of view,” said Houck.
When Secretary of State Reclaim Idaho’s office gave the go-ahead to collect signatures, Houck said, “That was a typo on our part, so it was fixed immediately.”
In light of all of this, Houck said he was glad the parties agreed on a solution to the problem.
“This is ultimately the best solution we could have come up with, especially given the small timeframe we looked at to tackle it,” said Houck. “Here is what we’re trying to achieve; we ask Mr. Mayville for a leap of faith, if you will. “