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Mountain States Policy Center President Chris Cargill debunks a common belief that cutting taxes reduces government revenue in a new analysis highlighting the impact of Idaho’s tax cuts over the past decade. As Idaho steadily lowered its top income tax rate from 7.4% in 2014 to a flat 5.3% today, tax revenue increased dramatically thanks to higher growth, despite criticism that these cuts would lead to missed budgets and less resources.
The full analysis can be found here.
MSPC pulled data revealing that the state collected about $1.16 billion in 2014, and $2.26 billion in 2025, which is an increase of about 95% – a doubling of the state budget over just eleven years. Such growth contradicts the assumption that lower tax rates automatically lead to lower government revenue.
Importantly, Idaho’s population did increase by about 24% over the same period, accounting for some of the new revenue. But, as Cargill points out, that’s not nearly enough to account for the much larger rise in revenue. Cash inflows to the state grew far faster than population, with tax revenue increasing by roughly 57% per person. Ultimately, MSPC’s study boosts the conclusion that the relationship between tax rates and revenue depends on how individuals and businesses respond. It is no wonder that more individuals and businesses chose to move into Idaho during a period in which tax rates were consistently lowered. Investment and business productivity naturally skyrocketed, driving tax collections higher.
MSPC’s conclusions hold up even when the numbers are adjusted for inflation. Cumulative inflation was about 39% from 2014-2025, which makes the increase closer to 40-45% in real terms – still an enormous growth in new revenue for the state, with per capita revenue growing at a remarkable 15-20%.
Lower tax rates typically encourage migration of families and individuals, plus greater business investment. With more economic activity generating taxable income, Idaho was able to collect more revenue despite lowering rates.
Meanwhile, states like Washington, California, and New York have instead increased their taxes to sustain government spending, causing the exact opposite effect on growth and new investment. Wealthy individuals, and large companies are leaving these states en masse because of increased taxes, which ultimately takes away tax revenue from the state. A Hoover Institute study published earlier this year estimates that California’s proposed 5% “wealth tax”, which has not yet even qualified for the ballot, has already driven away 30% of the estimated tax base as billionaires flee for friendlier economic environments like Idaho. Ultimately, Idaho will benefit from that exodus as a result of their lower tax rates and smaller size of government.
None of Idaho’s progress would have been possible without Idaho House Speaker Mike Moyle. Since the day he entered office in 1999, Moyle has championed a number of successful efforts to decrease tax rates, starting with a bill to lower the top income tax rate from its all-time high of 8.2% in 2000. Moyle also spearheaded legislation that lowered income taxes from 7.4% to 6.925 in 2017. Every year since 2020 saw another income tax cut, with rates sinking to 6.5% in 2021, a 6% flat tax in 2022, 5.8% in 2023, 5.695% in 2024, and 5.3% in 2025.
As Idaho looks ahead to further progress on lowering income tax rates and neighbors such as Washington move in the opposite direction with a brand new 9.9% income tax, Mountain States Policy Center’s evergreen analysis demonstrates that Idaho will do more than become more competitive with surrounding states. The state itself will benefit from higher revenue under lower tax rates too, as the economy takes off in response to good policy.
