Tax-cut bills spark debate, Daily Inter Lake, January 21, 2015
HELENA — Hearings on three bills by Republicans to cut taxes prompted discussions Tuesday whether the money should be returned, how it should be distributed, and if it would stimulate the economy.
Sponsors of two bills told the House Taxation Committee that the state budget surplus, estimated at $350 million as of mid-2015, is a result of excessive income taxes collected from Montanans. They said some of this windfall should be returned to taxpayers through lower taxes and predicted these cuts, in turn, would grow the economy.
The other bill, HB159, by Rep. Frank Garner, R-Kalispell, would create a permanent program to freeze property taxes on homes owned by people who are at least 65 years old and who live in Montana for at least seven months annually. They would not be charged property taxes greater than those assessed in the base year. General fund revenue losses would drop over time, reaching $1.1 million annually by fiscal year 2019.
Garner’s bill drew little support, with its only backer being Dave Wood of Helena, who called it long overdue.
State Revenue Director Mike Kadas, representing the Bullock administration, opposed the two major bills and warned that the proposed tax cuts would decrease the state surplus significantly. He called it “highly questionable” whether reducing taxes would generate more income, as bill supporters argued and debatable economically.
The committee heard, but didn’t vote immediately, on the three bills.
HB169, by Rep. Art Wittich, R-Bozeman, would create a one-time income tax credit of up to $100 per taxpayer for property taxes on an individual’s residence. It would temporarily lower income tax rates in 2016 and cut general fund revenue by $79.1 million in fiscal year 2017.
Wittich said the bill is similar to his 2013 bill that Gov. Steve Bullock vetoed. While his bill is for a one-time cut, Wittich said he’d prefer one with permanent income and property tax reductions.
Joe Balyeat, a former legislator now representing Americans for Prosperity-Montana, called HB169 “a perfect bill to kick-start wages.” He cited some national economic studies showing that past tax cuts nationally and in the states have yielded big increases in wage growth.
Kadas opposed the bill, saying 50 percent of the tax reductions would go to help the top 10 percent of taxpayers while everyone else would receive smaller shares. He said the bill’s “pretty big” price tag would lower the state’s surplus, which is an important tool in managing the budget.
In response, Wittich said later: “We’ve got about a $400 million surplus with the state of Montana. The question is, whose money is it? Is it the individuals who paid into it or the government’s? This would refund about 20 percent of the surplus.”
Heather O’Loughlin, co-director of the Montana Budget & Policy Center, also opposed the bill. She said the top 1 percent of taxpayers — those earning more than $455,000 a year — would each see their taxes cut by $2,200. In contrast, those earning $27,000 would receive a tax cut of $12 apiece.
Bob Story, a former legislator who now heads the Montana Taxpayers Association, said he reluctantly opposed the bill because it was a one-time only approach, not a permanent cut.
House Bill 166, by House Majority Leader Keith Regier, R-Kalispell, would permanently cut taxes. It would trim state income tax rates for each bracket of taxable income by one-tenth of 1 percentage point, beginning in tax year 2016. It would reduce income tax revenue by 1.6 percent annually or by about $82 million over the next four years.
Montana’s income tax collections have doubled to $1.047 billion in fiscal year 2013 from $516.3 million in 2000, Regier said.
“The income tax is collected from the working people of Montana,” he said. “They are hard-working people providing for their families. It (HB166) will reduce the amount taken out of their paychecks and put money in their pockets.”
Regier said the fiscal note estimating the costs of the bill fails to show the increased general revenue that it would produce.
It drew support from the Montana Chamber of Commerce, Montana Taxpayers Association and Americans for Prosperity-Montana.
“We believe it is a good head start,” the chamber’s Glenn Oppel said. “Every taxpayer will get a tax break. We think this is a modest approach to cutting taxes.”
Kadas and O’Loughlin opposed this bill for similar reasons as they did Wittich’s, saying high-income taxpayers would receive the largest tax breaks.
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.