MBPC RELEASES ANALYSIS ON TAX CUTS: Montana Lost Out on Nearly $1 Billion

Jul 19, 2016

By MBPC Staff

Today, the Montana Budget and Policy Center (MBPC) released its latest report “The Montana We Could Be: Tax cuts, aimed at the rich, take a toll.” This report analyzes the tax cut package in 2003, which has cost the State of Montana nearly $1 billion in the past 10 years through tax cuts that benefited the wealthy. The report notes that over half of the tax cuts went to the wealthiest 1 percent of households, those making more than $500,000 a year.

“These tax cuts made Montana’s tax system less equitable and have cost the state hundreds of millions of dollars, at a time when our communities face increased needs in K-12 education, school facilities, and crumbling bridges and roads,” said Heather O’Loughlin, Co-Director of MBPC. “In 2006, households making more than $500,000 received an average tax cut of $30,500 a year per household which is what most Montanans make in a year. Meanwhile, those making less than $65,000 a year received about $23.”

What could that $1 billion have bought?

• $900 million would cover the deferred maintenance costs of all public schools across the state.
• $1 billion represents the total estimated need, per year, to rebuild and repair Montana’s highway system.
• $45 million each year would provide $1,500 in financial assistance for every Montana college student.
• $27 million investment per year would provide high-quality early childhood education to every four-year-old in Montana.
• $32 million per year would provide Montana’s low-income working families additional support, through an earned income credit.

Highlights from the report include:

• An explanation of the 2003 tax cuts.
• A detailed analysis of the cuts including those who benefitted and the cost to the state.
• Areas of needed investment in Montana including pre-K, higher education, infrastructure, school facilities, and an earned income credit.
• Recommendations of ways to restore fairness to the tax system and raise needed revenue to invest in our families and communities.

The Montana Budget and Policy Center (MBPC) is a nonprofit organization providing in-depth research and analysis on budget, tax, and economic issues. Our core focus is publishing credible, timely, and easy-to-understand reports on the fiscal policies that most impact low and moderate income Montanans. Our research and analysis then informs public policy, the media and the broader public. To learn more about MBPC, visit our website www.mbadmin.jaunt.cloud.

MBPC worked with the Institute on Taxation and Economic Policy (ITEP) to calculate levels of lost revenue. Calculations were based on the ITEP Microsimulation Tax Model, which is a tool for estimating the impact of federal, state, and local taxes by income group. It uses a very large stratified sample of federal tax returns, as well as supplementary data on the non-filing population, to derive estimates that apply to taxpayer populations at the state level. The U.S. Treasury Department, the Congressional Joint Committee on Taxation, the Congressional Budget Office, and several state departments of revenue use similar models. For a more detailed explanation of the ITEP Tax Model, see http://www.itep.org/about/itep_tax_model_full.php.

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