H.R. 1, signed by the president on July 4, 2025, and otherwise known as the One Big Beautiful Bill Act, extends many of the federal tax cuts passed in 2017 and includes some new big tax breaks. These tax breaks overwhelmingly benefit the wealthy and are partly offset by deep cuts to food assistance and medical care for Americans with low and moderate incomes.
Montana will lose $230 million each biennium if lawmakers don’t act
Montana is on track to lose over $230 million (or more, see below) each biennium if lawmakers don't take action. That’s because Montana is more closely tied to the federal tax code than ever before. When Congress cuts taxes for the wealthy, that automatically results in an additional tax cut at the state level.
Luckily, Montana lawmakers can protect revenue. Disconnecting Montana’s tax code from these items would preserve state revenue for future needs of Montana communities, such as education, child care, and infrastructure. For a list of individual income tax provisions and estimated state revenue loss, please see the Legislative Fiscal Division’s memo. We’ve chosen to feature some of the worst tax provisions below, which we believe increase Montana’s revenue risk even further.
Business expensing benefits the wealthy, not Montanans
H.R. 1 includes some extremely generous depreciation provisions, including allowing businesses to deduct the full cost of qualifying equipment in the year it was purchased. Because Montana conforms to this federal provision, it will result in an automatic deduction on the company's state return, even though the investment may not be located within the state that provides the tax break. Research shows little evidence that this provision encourages investment at the federal level.
Montana should decouple from all expanded depreciation provisions in H.R. 1. They are costly and will not result in additional economic activity in Montana.
Opportunity Zones subsidize investment in other states
The Opportunity Zone provisions in H.R. 1 permanently extend a tax giveaway to the wealthy for investing in designated geographic areas. The concept was pitched as a way to help improve investment in low-income communities by offering tax breaks for investment. However, the program incentivizes investments that benefit wealthier households, such as luxury condos, as investors seek to maximize their return on investment.
Montana should decouple from Opportunity Zone tax breaks. This policy rewards the wealthy for expenses they would have made otherwise and subsidizes investments made in other states.
Increased SALT cap: tax giveaway to wealthy second homeowners
H.R. 1 includes increasing the cap on state and local taxes paid (SALT) from $10,000 to $40,000. Increasing this cap benefits only a small number of relatively wealthy Montanans, as the deduction is primarily a write-off of property taxes in Montana, and most primary residences do not have taxes over $10,000. This benefits those who own multiple properties, as property taxes on second homes are deductible in Montana (even if they are owned by someone living out of state).
Montana should codify the $10,000 SALT cap in state code. As raising this cap benefits the wealthy, it is not an effective way to mitigate rising property taxes. To address rising taxes, lawmakers should consider state-specific solutions targeted to families paying high effective state and local tax rates.
Qualified small business stock exemption: Giveaway for the rich
The qualified small business stock exemption (QSBS), expanded in H.R. 1, is misnamed, as it benefits few small businesses. While it was intended to provide a tax incentive for investment in small, start-up businesses, nationally, nearly all (94 percent) of the exclusion goes to households with an annual income of over $1 million. Like the other tax benefits discussed, QSBS often results in a state tax benefit for activity happening in different states, as it doesn't have to be in-state to qualify.
Montana should decouple from the federal QSBS exclusions to protect state revenue and prevent the state from incentivizing out-of-state investment.
Partial deduction for tips and overtime not targeted based on ability to pay
H.R. 1 includes provisions that partially deduct tips and overtime wages from taxation. While at face value, these provisions may seem to be targeted to lower wage workers, the reality is more complicated. Deductions for tips and overtime are not well-designed to benefit people most in need. Workers are vulnerable to other policy provisions in H.R. 1, which will likely result in financial losses, and as deductions depend on one's top income tax rate, they are regressive. To add to that, many lower-income folks fall under the standard deduction and do not benefit at all. Proven ways to help target tax benefits to workers with low wages include tax credits that are fully available to those with low incomes, such as the Earned Income Tax Credit or Child Tax Credit, which are more broadly available to workers with low incomes.
Montana policymakers should get more information on who will benefit from these changes, by income levels. Like other states, such as Colorado, the state should consider decoupling from the most expensive of these provisions, no tax on overtime.
Montana Lawmakers must act to preserve revenue for Montana kids
At a time when Montana families are seeking solutions to their childcare challenges and communities are asking the legislature to figure out how to better fund local schools, giving away more than $230 million each biennium moving forward is the wrong path. Montana lawmakers need to examine H.R. 1, provision by provision, and determine what is best for Montana, rather than sitting back and allowing our state's revenue to go to the highest bidder in Congress.
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.