A tax credit is a refund. It’s often applied against your tax liability or refunded directly back to you. Idaho offers 27 different tax credits. Some are only for businesses, like the investment tax credit, others are only for individuals, like the grocery credit.
Dan John is the former manager of tax policy at the Idaho Tax Commission. He says the state doesn’t just give out credits for the sake of giving out credits. “The theory is that the amount that comes in tax from either other businesses that purchases are being made from, or from the employees of the businesses that made those, more than offsets the credits that are given.”
Senior Fellow at the Center on Budget and Policy Priorities Michael Mazerov says many tax credits don’t end up paying for themselves. “It never generates enough activity for a credit to quote unquote pay for itself. And any policy maker who makes that claim just is doing it without any support from economic literature.”
Still, John says it’s difficult to quantify the benefit of tax credits. “When we put together numbers, we put together numbers of what we know, that’s what is on tax returns. We don’t know all of the upsides of the tax credits and things.”