End of Session: What happened to taxes in Montana?

Apr 25, 2019

By MBPC Staff

At the end of the legislative session, it is time to reflect on the policy wins and losses specific to our work on state tax policy. While revenue projections for the biennium did not come in significantly lower than projected, Montana has struggled through two difficult budget cycles, rounds of deep cuts to health and social services, and insufficient revenue to restore funds. MBPC staff pursued thoughtful and reasonable revenue proposals, provided research and testimony on over 100 tax bills, and fended off irresponsible tax policies from becoming law throughout the past 90 days. Here is a summary of our work related to tax legislation this session:

Advocating for revenue

The Legislature saw a range of proposals that would have raised revenue from a variety of different sources. Earlier this session, MBPC published a summary of tax bills that could have raised much-needed revenue to fund essential state services. The blog provides detail on the following proposals MBPC supported that were heard in House and Senate Tax Committees:

• HB 707, which limits the capital gains income tax credit. While HB 707 did have bipartisan support, unfortunately it died in committee on March 26, by a vote of 8-10.
• HB 697, to revise individual income tax laws, was a proposal to make filing taxes easier for Montanans, ensure that someone earning minimum wage pays a lower tax rate than the wealthy, and help the super-rich pay their fair share. On March 27, the House Tax Committee voted party-line, 7-11, tabling the bill.
• SB 339, proposing an increase to liquor taxes, was heard in Senate Tax Committee. SB 339 failed in committee on a tie vote, 6-6 on March 27.
• HB 650 proposed increasing liquor, beer, and wine taxes by 10 percent, a modest proposal to raise taxes that have not been increased in more than 20 years. This bill failed in House Tax committee, with a party-line vote of 7-11 on March 26.
• HB 691, eliminating the oil and gas tax holiday, was heard in House Tax Committee. This bill was expected to raise $8 million each biennium for communities impacted by oil and gas development and the development of a renewable resources trust fund. HB 691 failed in committee on March 26 on a 13-5 vote.
• SB 360, a modest proposal to increase the tax on rental cars from 4 to 6 percent. SB 360 passed out of the Senate but ultimately failed on a party-line vote of 7-11 in House Tax Committee on April 11.
• MBPC and many of our allies were deeply disappointed when Senate Bill 152, which removes the sunset on the 6-mill university levy to provide university funding, was tabled in House Tax Committee. Seventy years of overwhelming support by the voters should be enough to know that the 6-mill levy, which provides much-needed funding for our state universities and colleges, should be permanent.
• HB 723 provides for a review of income tax credits and MBPC supports this bill. While the amended version of HB 723 is not a strong as the original version, we support the Revenue and Transportation Interim Committee’s work to review the range of income tax credits in Montana. We will be watching this action throughout 2019 and 2020.
• HB 694 would increase the investment license fee from $200 to $400 and the individual license fee from $50 to $100. Investment advisors and companies pay license fees to the state. This proposal is estimated to raise $12.1 million over the 2021 biennium, and these fees have not been raised in over 2 decades. HB 694 passed on April 25.

 Successful defensive work to table harmful tax bills

While this session proved challenging once again to pass responsible revenue-raising bills, MBPC was able to successfully defend against many harmful tax bills. Below is a short summary of the bills we testified against:

• MBPC successfully organized and presented opposition testimony to HB 148. This bill would have required a supermajority of the Legislature to pass any tax or fee increases and would make it even harder for policymakers to enact a responsible and adequate budget. Senate Tax Committee made the right choice and tabled HB 148.
• HB 269 proposed a constitutional amendment that would limit the types of taxes Montana could levy to two of the following: income tax, property tax, and a general statewide sales tax. If it had passed, it would have resulted in severe consequences for the state budget, public services, and the state’s credit rating. MBPC successfully organized opposition to HB 269 and it was defeated on the House floor.
• MBPC testified against HB 130, which would revise income tax law to exempt military pensions. When fully phased in, the original bill would have reduced general fund revenue by $17 to $18 million each fiscal year. Once the bill was amended, it still would have cost the state $7.4 million per fiscal year. Given the state’s challenging budget cycles and significant cuts in the last biennium to senior and long term care services that have not been fully restored, MBPC opposed this bill. Current state law also exempts certain pensions based on income, and 45 percent of seniors over 65 years-old are currently exempt. While HB 130 made it through the House, it was tabled in Senate Tax Committee on April 11.
• MPBC actively opposed House Bill 401. This bill would have repealed the property tax exemption for tribal trust lands while the federal government reviews the application. This bill undermines tribal sovereignty and self-determination of the tribes. Simply put, it is a policy rooted in racism against American Indians. In addition, the fiscal note for this bill estimates only $125,000 in additional revenue to state government for FY 2020 through 2023.
• Senate Bill 217, which increases the amounts used in the federal calculations for taxable social security benefit, would have resulted in a loss of state revenue of approximately $20 million each year. Montana already exempts some social security income from taxation, targeted at lower income levels. Despite MBPC’s efforts, SB 217 passed both chambers and made it to the governor’s desk. Fortunately, Governor Bullock vetoed the bill on April 18.

The tax bills that got away 

There were two tax bills that MBPC opposed, but unfortunately made it to the governor’s desk.

• Senate Bill 239 provides a temporary property tax exemption for new fiber optic facilities. MBPC opposed this bill because local property tax is a zero-sum game, meaning that a taxpayer’s gain in taxes due is balanced by the losses experienced by other taxpayers. Schools, roads, and water system do not cost less because taxes were cut for one property tax payer. Cutting taxes for fiber optic facilities will result in other taxpayers paying more property taxes. In the last two decades, the share of property taxes falling on the backs of individual homeowners has risen – from 30 percent in 1994 to over 48 percent today. This bill made it through both the Senate and the House and will shift even more property taxes onto Montana home owners. MBPC is hoping the governor will make the right decision for home owners and veto this bill.
• House Bill 507 expands the property qualifying for the data center tax rate of 0.9 percent. Like SB 239, the lack of property taxes paid by these companies will have to be made up by other taxpayers, like residential property taxpayers. This bill unfortunately made it through both the Senate and the House. MBPC hopes the governor will veto HB 507.

MBPC is disappointed that the House and Senate Tax Committees were unable to advance reasonable revenue proposals. Responsible revenue policies are an important part of the equation to build a state budget that can serve all Montanans. Despite the uphill battle, our work was crucial to prevent bad tax policies from becoming state law. Even though this session has ended, MBPC’s work is not done. The bills to cut taxes for the wealthy will keep coming in the future and MBPC will be there to fight back. In the interim, MBPC will continue to do everything we can to bring communities, businesses, advocates, and policy makers across the state together to have meaningful conversations about revenue in Montana. We can do better. Montana families deserve better.