Taxes a critical battle in second half of Legislature

This current biennium, however, actual and anticipated tax revenue has dropped off because of lower than expected income tax collections from individuals and corporations and a drop-off of natural resources taxes as the Bakken oil boom faded.

“I think some responsible decisions need to be made about our overall budget and where that funding comes in and also the possibilities of increasing revenue in a few different areas,” Bullock said last week.

Republican leaders are opposed to tax increases.

“I’m only speaking for myself, but I’ve never voted for a tax increase since I’ve been here,” said Senate President Scott Sales, R-Bozeman, who is serving in his seventh session. “I don’t think it’s a good idea to raise taxes, especially when you have declining revenue. I don’t think it’s a good time to raise taxes, period.”

House Speaker Austin Knudsen, R-Culbertson, said, “From my perspective and from House leadership’s perspective, we want to craft a responsible budget, we want to fund the things that need to be funded … and we’re going to do that, ideally, without raising any taxes.”

Leaders of nonprofit groups that follow tax issues have opposing views on tax hikes.

“The budget cuts we are facing will have a devastating impact on our families and communities,” said Heather O’Loughlin, co-director of the Montana Budget and Policy Center. “Rather than considering common-sense measures to ensure we have adequate revenue, legislators seem ready to ask families to pay more in tuition, seniors and individuals with disabilities to go without critical services and local governments and taxpayers to shoulder a greater share of the costs to ensure our communities are safe.”

But Bob Story, president of the Montana Taxpayers Association, questioned the need to raise income taxes now on Montanans with the highest incomes, saying: “The top earners already are paying a disproportionate share of income taxes.”

“The problem from our perspective is both the Budget Office and Legislative Fiscal Division see this as a short-term (revenue) problem, but all the tax increases are permanent,” Story said.

Here’s a look at the various tax bills that have been introduced or will be, by type:

--Income taxes: Bullock’s budget relies on $123 million of revenue in general fund revenue and $33 million in state special revenue from some new taxes or tax increases. They include imposing a new, higher tax rate for people making more than $500,000 a year.

“It doesn’t make sense that someone making the minimum wage is paying the same rate as someone that’s making $250 an hour,” Bullock said.

Bullock’s bill to create the new tax bracket has not been introduced yet. It would raise nearly $46 million over the next two years. However, the House Taxation Committee already has tabled, by party-line votes, a pair of similar bills by Reps. Kim Abbott, D-Helena, and Tom Woods, D-Bozeman.

Another bill advocated by Bullock would eliminate a tax credit for taxpayers with capital gains income topping $1 million and raise $26 million over the biennium. He also is calling for equalizing deductions for individuals’ estates and trusts, which would generate $3 million in income the next two years. Neither bill has been introduced yet.

--So-called “sin” taxes: A bill introduced on Bullock’s behalf to double the excise tax on wine and raise about $7 million over the next two years already has been tabled. Its sponsor, Sen. Lea Whitford, D-Cut Bank, has another bill to boost state excise taxes by 10 percent on wine, beer and liquor and raise the same amount as her other bill.

Sen. Mary Caferro, D-Helena, will introduce a bill to raise Montana’s cigarette tax by $1.50 a pack to make the new rate $3.20 a pack and boost the taxes on chewing tobacco the same and put on a new tax on e-cigarettes. It would raise $43 million a year, with much of the revenue targeted for programs in the Department of Public Health and Human Services.

Bullock has called for raising the tax by 50 cents a pack with matching increases for other tobacco products and a new tax on e-cigarettes, raising about $22 million over the biennium, but the bill hasn’t been introduced yet.

The governor also called for a 6 percent excise tax on medical marijuana sales. Rep. Tom Jacobson, D-Great Falls, is sponsoring the bill, which would generate about $1.3 million over two years.

--Corporate taxes: Sen. Dick Barrett, D-Missoula, has a bill to eliminate the water’s-edge election for corporate taxpayers and make international corporations pay the same rate as those in Montana. It would raise $6 million over the next two years.

Democrats also are considering a bill to tax out-of-state companies like Amazon that sell mail-order goods here and compete with Montana’s Main Street businesses. No bill has been introduced yet.

Although some of the Democrats’ bills to raise taxes have already been tabled in committee, Senate Minority Leader Jon Sesso, D-Butte, isn’t ready to give up hope.

“It’s the bottom of the fourth (inning) here, top of the fifth coming up at transmittal, and things have got to run their course here,” he said. “It’s not like I’m being unrealistic about it, but I think to the extent that there’s momentum to restore some funding in the critical areas, there’s got to be a reciprocal means to do that.”