BOISE, ID – The massive federal tax and spending package, called the “One Big Beautiful Bill Act,” approved by Congress in July will impact state budgets next year — but less than a week ahead of the Idaho legislative session and the beginning of state budget-setting, lawmakers are not sure the extent of cuts the bill could result in.

The federal tax changes could reduce Idaho’s revenue significantly in the near-term. However, it’s unclear by how much, as recent estimates cited by several state officials range from $115 million to around $400 million.

Asked about discrepancies between estimates, officials cited factors such as complexity of federal versus state tax laws, unanswered questions about definitions in the federal bill regarding some of the provisions, and the potential for people to report their income in new ways to pay lower taxes.

“I think it’s somewhere between $180 million and maybe $240 million, somewhere in there, and probably closer to $220 million. But that’s just a guess, like everybody else is doing,” House Speaker Mike Moyle said at a press conference Thursday. “And until we know those definitions and how it’s going to apply, we just have to guess.”

The state is facing a projected $40 million deficit for the current fiscal year, which ends June 30, and an estimated $600 million to $1 billion deficit for the coming fiscal year.

Little will submit his proposed budget on Jan. 12, the first day of the 2026 legislative session.

A spokesperson for Idaho Gov. Brad Little’s told the Idaho Capital Sun that the governor “is proactively assessing the impacts of the One Big Beautiful Bill and coordinating closely with state agencies to ensure Idaho remains fiscally responsible and well-positioned moving forward.”

Estimated cost of federal tax conformity in Idaho vary widely 

Idaho lawmakers typically approve an annual tax conformity bill, which aligns Idaho’s tax codes with the federal Internal Revenue Code, early in the year with limited fanfare or debate. However, with the major federal policy change, this year’s vote will include decisions regarding new tax policies such as no taxes on workers’ tips, no taxes on overtime for some workers, and no taxes on interest on auto loans. All of these decisions may reduce Idaho’s revenue.

The Idaho State Tax Commission as of Jan. 8 has estimated the state would lose between $115.6 million and $193.3 million of revenue the first year with almost all the federal charges, according to an analysis received through a public records request.

In July, the nonprofit national tax policy organization the Tax Foundation estimated Idaho would see a  $284 million cut in revenue if lawmakers adopt all Big Beautiful Bill tax changes. Another report by the Idaho Center for Fiscal Policy noted that the Tax Foundation’s estimate did not include provisions related to bonus depreciation, which is one area of the tax code where Idaho does not follow federal policies.

If the state did opt to re-align itself with federal bonus depreciation, the cost could be as high as $435.4 million, the Idaho Center for Fiscal Policy estimated.

Moyle said Thursday he’s seen estimates as high as $800 million, but did not say where he saw that estimate. Earlier this week, Moyle told the Sun the cost could be closer to $400 million.

Little said at the same event Thursday that his office would unveil its own calculation but didn’t elaborate on what it would be. Asked why the spread among predictions was so large, the governor responded, “it’s really quite complicated.”

The top House Democrat, Minority Leader Rep. Ilana Rubel, Boise, also emphasized the uncertainty of the potential number, but expressed more concern about it.

“Frankly, it’s a dynamic situation, because people have some flex and how they can characterize compensation,” Rubel said. “And there’s going to be a lot of incentive under this to characterize things that used to be salary as tips … I don’t like jumping off ledges where I can’t see where the bottom is.”

Idaho lawmakers need to agree on revenue number to set budget

Idaho’s Constitution requires the state to balance a budget, but to do that, lawmakers must estimate the revenue it will receive to balance it against. Whatever decision is made on tax conformity will impact that revenue number.

Republican legislative leaders on Thursday expressed support for adopting most of the federal tax changes, although maybe not all.

Moyle said “there’s no way in heck” he would oppose the changes such as eliminating taxes on some overtime and tip income and the increased senior senior deduction. Moyle said that because the state left a buffer in its budget last year, that the budget would be “in good shape.”

“We’re going to have to guess, which I hate to say, but that’s what we’re going to do,” Moyle said. “We’re going to guess what the number (is), and we’re going to walk out of here with a balanced budget.”

Democratic leaders in the House and Senate on Thursday expressed much more skepticism about the cost of conforming.

“I wish we wouldn’t even be in the position that we had to question conformity. We always conform,” Senate Minority Leader Melissa Wintrow, D-Boise, said.

Rubel noted the state is already facing a projected budget deficit.

“The first rule of holes is when you’re in one, stop digging,” Rubel.

What are other states doing to prepare? 

Other states are facing revenue reductions as well.

In early December, Utah Gov. Spencer Cox included in his proposed budget an estimated revenue cut of $500 million in the next two years from federal tax conformity, Utah News Dispatch reported.

Cox announced the state intended to comply with the tax changes.

Pew Research in late November published an analysis of different states’ approaches to preparing for the impact of the federal legislation, which is also known as “H.R. 1.”

“Special sessions have been one way (states are preparing),” said Justin Theal, a senior researcher at Pew Research Center. “Another way has been, state leaders really leaning on special committees and task forces that existed prior to the passage of H.R. 1, but have all of a sudden become front and center in terms of really informing what the impact of these federal changes will be on the state’s overall fiscal trajectory.”

New Mexico had already established its Federal Funding Stabilization Subcommittee, Theal said, but later opted to use the subcommittee to evaluate the federal budget package’s potential impact. Vermont had an existing task force that in July published a report on declining federal transfers, and although it was compiled before the passage of the federal budget bill, leaders there are using the report to inform their response, Theal said.

Colorado Gov. Jared Polis in August called lawmakers back into a special session to address the estimated $800 million budget shortfall from the tax provisions in the federal budget package, Colorado Newsline reported.

Across the state, Theal said he both saw these proactive approaches as well as some states opting to wait and see. He said he saw some states using stress tests similar to those used by large banks to understand how a big shock to the system may affect their ability to balance budgets.

“Traditionally, those things are used for events like a recession,” Theal said, “but states are increasingly using them to kind of game out what a sudden loss of federal funds might mean.”

This story first appeared on Idaho Capital Sun.