The Idaho State Tax Commission recently released its latest annual tax burden study and the findings confirm that Idaho is on the right track for economic competitiveness. This outlook continues to improve with the additional tax relief provided over the last several years. The study is based on the census data from 2022 and shows that Idaho is one of the best states in the union at providing its residents with a manageable tax burden.
Idaho Tax Commission Chairman Jeff McCray commented, “2022 has been the most advantageous tax year for Idaho taxpayers in the last 25 years. Idaho is 15.7% below the U.S. average tax rate for personal income paid in taxes and 17.7% below the U.S. average rate for taxes paid per person.”
The Commission found from calculating state and local taxes that Idaho ranked 41st in overall tax burden and 43rd when comparing taxes per person (50 being the lowest burden). Idaho taxed $93 per $1,000 of personal income. This total includes $24.24 of individual income tax, $9.70 of corporate income tax, $27.23 of sales tax, $19.50 of property tax (local), and $6.06 of motor vehicle tax. It’s helpful to compare these figures to other states. In contrast, New Mexico in 2022 taxed $152 per $1,000 of personal income and New York taxed $168, which is 80% more than Idaho.
As the graph shows, Idaho mainly relies on income, sales, and local property tax (there is no statewide property tax). Idaho’s rankings will likely look even better in the years to come because of the passage of new tax relief legislation over the past couple of years. This year the Idaho Legislature reduced the state income tax rate for individuals and businesses from 5.695% to 5.3%. This will result in $253 million being sent back to Idahoans. Over the past four years, the state’s income tax rate has been reduced every legislative session.
While Idaho, Montana, and Wyoming have been working to reduce their tax burdens, Washington is heading in the wrong direction.
Over the last 10 years, Washington State has slid from being ranked 15th in business climate to 35th in the country. Washington technically doesn’t have a graduated income tax, due to a prohibition in the state constitution, but in 2022 it passed a capital gains income tax charging 7% on stock sales exceeding $250,000. State lawmakers continually raise taxes and yet are still facing a $10-12 billion budget shortfall. This year Washington is considering multiple tax increases that are estimated to be the biggest in 30 years. This includes imposing a first-in-the-country wealth tax on assets and worldwide wealth, property tax increases, a business tax increase, and a tax on paying certain employees high wages.
This tax and spend mentality of the past may be getting a needed check, however. Recently elected Governor Bob Ferguson provides hope as he stated about the budget, “We’re not going to tax our way out of this thing. Not going to happen.”
Wyoming on the other hand continues to stay on the right track. Forgoing a personal or corporate income tax, it ranked 1st in the Tax Foundation’s 2025 State Competitiveness Index. Wyoming holds a low tax burden, being 47th in the country with only $86 taxed per $1,000 of personal income. Wyoming lawmakers also acted this session on tax relief when they passed legislation that cut property taxes by 25% on homes valued up to $1 million.
Wyoming Governor Mark Gordon celebrated this effort saying, “I have always supported tax accountability, and this bill provides tax relief without transferring the burden to our core energy industry. This act, coupled with the bills I signed last year, responds to the call for property tax relief.”
Montana is trending upward as well. Over the past couple of years, it has reduced the number of tax brackets from 7 to 2 and lowered the top rate from 6.9% to 5.9%. This legislative session legislators have focused on efforts to reduce the burden felt by the income tax even more. Governor Gianforte would like to do this by lowering the top tax bracket rate from 5.9% to 4.9%. No matter which tax relief version is passed, it’s encouraging to see the focus of the legislature be on making Montana even more business-friendly and easing the burden of everyday Montanans.
Governor Gianforte said, “Since 2021, we’ve lowered the income tax rate most Montanans pay from 6.9% to 5.9%. We should go farther. We should reduce that income tax rate from 5.9% to 4.9%, providing tax relief to workers and small business owners alike. That’s why we should expand the earned income tax credit for hardworking lower- and middle-income Montanans… Our proposed tax cut provides more than $850 million in permanent relief, a new record tax cut that benefits Montanans at every income level. That’s $850 million that will remain in the pockets of Montanans who earn it.”
The Idaho Tax Commission’s findings are clear that Idaho, Montana, and Wyoming are moving in the right direction on tax burden. Washington is the odd state out with its continued fixation on a tax-and-spend budget mentality. Perhaps this is why it’s the only state of the four facing a budget shortfall.
Based on the ongoing regional state tax-cutting efforts since 2022, the next iteration of Idaho’s Tax Commission report should have even more good news for taxpayers in Idaho, Montana, and Wyoming.