KXLH - February 2, 2017
Montana’s wealthiest 1 percent should pay more taxes on their top income, to provide extra revenue to help the state avoid deep budget cuts that will harm vital services, a state Democratic lawmaker argued Wednesday.
“We know that we’ll have to make cuts, but we can’t cut our way through this problem,” said Rep. Kim Abbott of Helena. “We absolutely have to raise revenue. This is my modest proposal to start this conversation.”
Abbott is sponsoring House Bill 330, which would raise the state income tax rate from 6.9 percent to 8.9 percent for taxable income over $400,000 – the top 1 percent of income-earners in Montana, or a few thousand households.
Democratic Gov. Steve Bullock also has proposed raising income taxes on top earners, to help balance the state budget, but Abbott’s bill is not the governor’s proposal.
GOP leaders in the Legislature, where Republicans control the majority, have said they won’t approve any such tax increase, calling it a burden on “job creators.”
Lobbies for several business groups echoed that argument Wednesday as they testified against HB330, telling the House Taxation Committee that the tax increase would harm Montana’s business climate and discourage investment by businesses.
“I’d argue that taxes create a wedge between what the employer pays and what the employee receives,” said Bridger Mahlum of the Montana Chamber of Commerce. “So when it comes to that hiring decision, if there’s a higher tax on the bottom line for someone’s business, that might cut a job.”
Under current state income tax law in Montana, any taxable income over $17,400 is taxed at 6.9 percent.
Several left-leaning lobby groups and the state’s largest labor union, MEA-MFT, testified in favor of HB330, saying the state has lost millions of dollars of revenue from a 2003 income-tax cut bill that lowered the top rate from 11 percent to 6.9 percent.
Heather O’Loughlin of the Montana Budget and Policy Center said the tax cut was supposed to cost the state only $25 million a year in revenue, grow the state economy and spread its benefits fairly evenly among all income-earners.
A study last year by the center showed that the tax cut has cost the state $900 million in revenue from 2005-2015 and that more than half the benefit went to the top 1 percent of income-earners, while middle-income families had tax cuts averaging a few dollars a year, she said.
Abbott said legislative budget committees this year are considering cuts that would hurt vulnerable citizens, lead to double-digit increases in college tuition and undercut funding for maintaining roads and bridges.
“We thought, in the current budget time, with the budget pressure we’re facing …. that the top 1 percent of (income-tax) filers could contribute a little more to help get us through,” she said.
But Republicans on the House Taxation Committee noted that state income-tax revenue has mostly climbed since the top tax rate was cut in 2004. They also suggested that any money not paid in income taxes had been invested in the private sector economy.
The committee took no immediate action on the bill Wednesday.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.