Have Your Cake and Eat It Too!
by Senator Brent Hill
In his state of the state address, Governor Dirk Kempthorne announced a plan to give every Idahoan a $50 tax rebate in the form of energy assistance. Although the plan embraces the solid Republican principle to reduce taxes, it has been criticized by legislators and citizens alike.
Some have complained that $50 per person is not enough to bother with. That is easy to say—unless, of course, you are struggling to make ends meet. There are plenty of families in my community that will welcome the two or three hundred dollars this program will provide them. Even families with greater resources will see a significant cut in their taxes. A family of four with an annual household income of $50,000 pays about $1,500 in Idaho income tax. A $200 rebate would represent a reduction of over thirteen percent in their taxes! That sure beats the five percent tax reduction passed by the legislature back in 2001.
Others have criticized Kempthorne’s plan claiming that “energy assistance” should go only to the poor who need it, or that the money could be better used for public education. Well, that is easy to fix—without the legislature’s help: If you need the rebate, keep it. Pay your energy bills, repair your car, feed your family. That is what it is for.
If you feel that the rebate would be better spent on public or higher education, contribute your rebate to the Idaho school or university of your choice. The government will then reimburse you for most of your donation through tax reductions. This is how Idaho law encourages people to take matters into their own hands–and pays them to do it:
1. You deduct the contribution on your federal income tax return (if you itemize your deductions) and your tax bill goes down by that amount multiplied by your tax rate: $200 contribution x 15% (depending on your federal tax bracket) = $30 that the U.S. Government gives back to you.
2. Ditto for your state income taxes: $200 x 7% (estimated tax rate) = another $14 in tax savings.
But the best is yet to come:
3. Idaho allows a direct credit against your state tax liability of one-half of your contribution to educational institutions located in Idaho (up to a $400 contribution on a joint return): $200 x 50% = $100 that you just compelled the state to pay to public education by reimbursing you for your donation.
Result: You end up with $144 in tax savings and your school district ends up with $200 to provide a better education for our children. Everybody wins.
In 1789, Queen Marie Antoinette was (erroneously) credited with saying of her subjects who had been taxed into poverty: “Let them eat cake.”
In 2006, Governor Kempthorne has proposed a workable plan for our citizens: “Let them have their cake. . . and eat it too!”
