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Idaho's Tax Ballot Measure's Errors are Real and Significant

Jared Walczak
Jared Walczak
A pending tax ballot measure in Idaho seems replete with drafting errors that would increase taxes for everyone, create a large tax cliff, and invert the inflation adjustment mechanism. I flagged these issues a month ago, but on Sunday, the Idaho Press published a long article saying, in essence: not so fast. Or, more precisely, “CLAIMS UNFOUNDED.”
I’m using this forum to lay out why I believe that dismissal of these concerns to be unwarranted.
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Idaho’s Tax Ballot Measure’s Errors Are Real and Significant
Drafting errors are part of the legislative process, enough so that there’s a term for them—scrivener’s errors—and, typically, procedures in place to catch them early on and, failing that, correct them. Sometimes the errors are largely inconsequential, like mis-numbering a list; other times, a mistake or oversight can undermine the purpose of a bill or change the law in unexpected ways.
At issue here is where on this spectrum an Idaho ballot measure imposing a 10.925 percent marginal income tax rate on high earners falls. A month ago, I identified a series of issues with the ballot measure’s language which could (1) reverse this year’s across-the-board tax cuts, (2) create a tax cliff that gets larger with each passing year, and (3) institute a reverse inflation adjustment, where inflation accelerates rather than combating bracket creep.
Like Bartleby, the only scrivener most people can call to mind, proponents of the Idaho ballot measure “would prefer not to” believe that the numerous mistakes and conflicts in the measure are of consequence. It’s nice to think they aren’t—but against an article in the Idaho Press that declares “CLAIMS UNFOUNDED” in the headline, I’d argue that it’s not nearly that simple.
Let me briefly rehearse the concerns, and address the Idaho Press’s reporting, which takes at face value the arguments of the drafter of the flawed measure. It also misinterprets several of the issues, and thus provides assurances that have little to do with the actual concerns—particularly regarding the tax cliff and inflation indexing.
Reversing the 2022 Tax Cuts
First, I noted the potential of the ballot measure to reverse the 2022 tax cuts, since it amends and reenacts the language of Idaho Code Section 63-3024 with the new tax rate and bracket, but also with the other rates and brackets as they existed in 2021, before the across-the-board tax cuts of earlier this year.
I pointed out that, when legislatures amend the same code section multiple times in a single session, there are a number of ways to reconcile the changes. To elaborate: sometimes a keeper of the rolls can make technical adjustments before a bill is enrolled; sometimes the bills can be signed by the governor in a certain order to avoid conflicts; sometimes the governor sends down an amendment; and sometimes, either before or after enrollment, a code commission might intervene in a ministerial capacity. The challenge here is that this initiated statute was not introduced in the same legislative session as this year’s tax cut, or for that matter, in any legislative session at all. As a ballot measure, to be presented to the voters this fall, some of the ordinary means for conforming multiple amendments to the same code section are not available.
The Idaho Press article reminds readers that, for formatting purposes, the portions of code that are being amended in a bill are indicated by strikethroughs and underscores, and that the initiative only underlines the new bracket. This is true—but to be clear, the concern was never about how bills are statutorily required to be formatted in Idaho (and elsewhere), but about what is legally binding. When a ballot measure requires “That Section 63-3024, Idaho Code, be and the same is hereby amended to read as follows,” I pointed out that what follows is, presumptively, the new text of the statute, formatting notwithstanding.
I caveated that, while the ordinary corrections methods would not appear to be available with a ballot measure, it was possible that the correction would nevertheless be made. It’s an area of ambiguity, but I explicitly ruled in the possibility that legislative or tax administrators would try to fix the problem, given that restoring the old brackets wasn’t the drafters’ intent and was merely an issue of when they drafted it (before the tax cuts). Since then, however, both the Attorney General’s office and the Secretary of State’s office have indicated that they do not think authority exists to avoid reversing the tax cuts.
The initiative’s drafter says otherwise, and the Idaho Press article adopts his perspective, though it is not clear why. The argument doesn’t engage at all with how the ballot measure process might be different, and confuses the issue by explaining why the formatting practices are required rather than really engaging with what the initiative’s consequences would be.
Consider this from the article, for instance:
Nugent also pointed to existing Idaho law, in Title 73 of Idaho Code, which addresses multiple amendments to a single section of law. ‘If the amendments can be read into the section without conflict, such amendments shall all be effective and shall be compiled as if made by a single enactment,’ the law says. That means both this year’s successful tax-cut legislation and the initiative would be read together to resolve any conflicts, so the tax cuts for the existing, lower brackets would remain.
Except the words within quotation leave out an extremely important clause. Here’s the full provision, with emphasis added:
“If multiple amendments to a single section of the Idaho Code have been or are made during a legislative session, and if the amendments can be read into the section without conflict, such amendments shall all be effective and shall be compiled as if made by a single enactment.”
The Idaho legislature adjourned for the year. This ballot measure was not part of that legislative session (and no ballot measure would be). Leaning on this provision simply doesn’t work.
The article also seems to imply that the Attorney General’s office has reversed its prior conclusion that the old rates would be reinstated, but that’s not what they said. Here’s the article:
“The ballot measure reprints the old, higher rates on incomes below the new threshold, potentially restoring the pre-2022 rates – a tax hike for everyone, not just high earners,” Walczak wrote.
The Idaho Attorney General’s office, in an email to Chief Deputy Secretary of State Chad Houck dated July 19 addressing the claims in the article, appeared to agree. But Kane, who wrote the email, said it was a response to a question that “analyzes the likely effect of the initiative if adopted.”
“It was not a commentary on the drafting of the initiative,” Kane wrote.
It is hard to comprehend what the argument is here. Kane is distinguishing—as I do—between the effect of the measure if adopted now (“the likely effect of the initiative if adopted”) and its intent when initially drafted.
The article also quotes the Attorney General’s office as follows:
Walczak told the Idaho Press in an interview that based on what he’s observed in other states, ‘A ballot measure is separate from the legislative process, and the concern here is that the Code Commission and the other processes normally available to conform these measures may not be available.’
But Kane noted that initiatives in Idaho are ‘a law of the state of Idaho on equal footing with every other law. In that regard, the Legislature is free to amend or repeal the initiative as it sees fit.’
These are not competing claims. To reiterate, at issue is whether the normal ministerial processes for administratively conforming legislation are available with a ballot measure. There is absolutely no question that a future legislature can make any changes it wants to the new law if it is ratified by the voters, including repealing it entirely.
The measure’s drafter also cites the annual Codifier’s Corrections bill, an omnibus that fixes typos and minor errors made in legislation in the prior session, as a fix for this or other errant provisions of the legislation. I’ll discuss this further in considering the additional errors.
Inverted Inflation Adjustment
Idaho’s existing income tax brackets are inflation-adjusted to avoid bracket creep. The new $250,000 bracket would also be inflation-adjusted (though in a way that creates a tax cliff—more on that later), but there’s an extraordinary error in the language. The numerator and denominator are reversed, such that the kick-in of the new top marginal rate gets lower as inflation erodes the value of the dollar, rather than higher. If we had 2.5 percent annual inflation from here on out, the kick-in would have eroded the value of the top rate kick-in by 40 percent within a decade.
As the Idaho Press article notes, the original draft of the initiative had the correct numerator and denominator, but during a review process in which the Attorney General’s office provides nonbinding recommendations for adjustments to the measure’s language, their office inadvertently flipped them while tweaking surrounding text. That error is troubling. It’s also unfortunate that the initiative’s supporters didn’t catch the error when they decided to adopt the new language. But the unfortunate way the error developed is also immaterial: it’s still what the language says, and it’s still what people will be voting on.
In Idaho, like most states, legislators don’t draft their own bills. In fact, across the country, this work is usually the responsibility of nonpartisan legislative drafters who work for the legislature. Sometimes they make mistakes—occasionally big ones—that are unrepresentative of the bill sponsor’s intent. Usually they are caught; sometimes they aren’t. No one thinks that because the sponsor didn’t intend for the drafter to make a substantive mistake, and did not catch it, that the language is nonbinding or can be changed administratively at a later date.
Inverting an inflation indexing provision is not like mis-numbering a list. It is substantive, and not something that those charged with codifying or applying the law can easily change or ignore. This would ordinarily be beyond the reach of a simple, undisputed “codifier’s correction.” Unfortunately, the Idaho Press article dispenses with the concern about this major error—one that will ultimately mean that a 10.925 percent tax rate on high earners will fall upon a larger share of Idaho taxpayers with each passing year—by focusing on who is to blame, without addressing the core concern about its policy implications.
Tax Cliff
Idaho’s existing tax brackets are indexed using a 1998 base year. Conventionally, if making changes—including adding additional brackets—they would either all continue to be indexed based on the original base year, or the existing brackets would be updated so that they can be indexed against a new base year. The ballot measure fails to do this, instead indexing the $250,000 bracket on a 2024 base year while maintaining the 1998 base year for prior brackets.
Under the new law, Idaho residents with more than $250,000 in taxable income would owe $16,097 plus 10.925 percent on amounts above $250,000. And therein lies the problem. Because the existing brackets are based on a prior base year, the amount owed on that first $250,000 is less than $16,097. The calculation is as if there were never any inflation adjustments. This creates a tax cliff of $90 on its own, which the ballot measure’s sponsors seem to acknowledge and dismiss as unimportant—while saying that the base year choice was intentional—but both the article and the initiative’s sponsors fail to notice the way that the tax cliff is exacerbated by the other errors.
In fact, the initiative’s drafter seems to misunderstand the issue entirely:
The base year for the inflation adjustment to the new top bracket was set at 2024; the initiative, if passed, would take effect for the 2023 tax year, for which taxpayers file returns in 2024.
Nugent said, “He’s really reaching, isn’t he? … If indeed he’s right and it’s not just an academic argument, that’s something the Legislature has three or four years to clean up.”
The issue is not that a base year of 2024 is used in 2023 (it’s a bit sloppy, but there presumably just wouldn’t be anything to adjust initially), but rather the difference in calculations under the lower brackets when they have been adjusted against a 1998 baseline. The new text functionally assumes that there was no inflation between 1998 and 2024.
More importantly, however, $16,097 in liability is based on pre-2022 tax cut figures. If the drafters prevailed and the old text wasn’t reinstated (that is, the new tax cuts remain in place), then $16,097 would not be $90 but $1,319 more than what is owed on the first $250,000 in taxable income. By proponents’ own arguments (which presuppose that the 2022 tax cuts remain in place), the tax cliff is $1,319, yet the Idaho Press reports: “The potential difference: About $90.” This can only possibly be right if the drafters are wrong, and everyone is getting a tax increase under the measure.
And it gets way worse over time, since that $16,097 figure would be inflation-indexed against a 2024 baseline going forward. In reverse, remember. So what is dismissed as a meaningless $90 tax cliff would, under a 2.5 percent annual inflation assumption, be a $9,203 tax cliff after 10 years. Earning a single additional dollar of income would result in $9,203 in additional tax liability.
These are major concerns, and nothing in the Idaho Press article warrants the bold conclusion that the claims are unfounded.
The legislature is, of course, free to do what it wishes. It could simply repeal the entire measure should voters adopt it. Short of that, the legislature could adjust these errant provisions. But if they did so, they would have to deal not only with the potential for arguments that they are subverting the voters’ will—perhaps muted, but not eliminated, by arguments that voters intended what drafters currently say they wanted, as opposed to what the text on the ballot actually reads—but also with a substantial fiscal impact statement under which these supposedly technical changes would come across as a tax cut worth hundreds of millions of dollars.
Drafters seem to be arguing that (1) these aren’t errors; (2) perhaps they are errors, but someone can fix them administratively; and (3) if they can’t be fixed administratively, the legislature can simply adopt a new law reversing part of the newly adopted ballot measure. Idaho’s tax increase measure is quite possibly the most error-ridden tax ballot measure I’ve ever seen, and proponents’ arguments don’t do much to allay these concerns. 
Disclaimer: The views expressed in this newsletter are my own, and not those of my employer.
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Jared Walczak
Jared Walczak @jaredwalczak

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