Woods bill would raise tax rates on wealthy Montanans

Feb 22, 2017

By MBPC Staff

Bozeman Daily Chronicle - February 22, 2017

A Bozeman legislator on Tuesday proposed raising the state income-tax rates on the wealthiest Montanans to help raise money to fill holes in budgets for public schools, universities and human services.

In his House Bill 452, Democratic Rep. Tom Woods would add a new state tax rate of 7.4 percent on taxable incomes starting at $300,000 and a 7.9 percent rate on incomes starting at $500,000.

Under an overhaul of the state’s income taxes by Republicans in 2003, Montanans now pay the top rate of 6.9 percent starting with taxable incomes of $17,400. Prior to that, the top rate was 11 percent on taxable incomes of more than $101,000.

If enacted, Woods’ bill would raise $6.6 million in additional revenue in fiscal 2018, $24.5 million in 2019, $22.8 million in 2020 and $24.4 million in 2021, according to a fiscal note from the governor’s budget office.

Woods told the House Taxation Committee that, under a progressive income tax structure, the tax rate increases as taxpayers’ income rises, so those in the upper brackets would shoulder an increase.

“It seems fairly reasonable to me,” Woods said. “It’s a tax bracket we can all aspire to if we become a hospital CEO, a university president or the commissioner of higher education.”

He said the added revenue can help fill the budget holes faced by education and human services this year in the current, tight budget this session.

In response to a question from Rep. Mary Ann Dunwell, D-Helena, Woods said he would be willing to put a “sunset” clause on the bill so that the higher tax rates would be eliminated in a set number of years after the state’s revenue picture improves.

Winnie Schaefer, a caregiver from Wolf Point, supported the bill, saying, “I’m proud to pay my share. It seems like the system is stacked against so many of us low-income workers.”

Heather O’Loughlin of the Montana Budget and Policy Center said HB 452 was “a common-sense bill” to increase tax fairness.

Lower income families in Montana today pay a higher share of their income in taxes than those with the highest incomes, she said.

“At a time when the state is facing proposed cuts that will negatively impact Montana families, HB 452 can be part of the solution,” she said.

Stuart McCarvel said he worked on the railroad but took lower-paying human services jobs when he was laid off.

“When I worked jobs that paid well, I paid more taxes. I don’t understand why the guy making a half-million (dollars) a year would object to paying a little more.”

The bill’s opponents were representatives from the Montana Taxpayers Association and the Montana Chamber of Commerce.

Bob Story of the Taxpayers Association said he opposed raising taxes on the top 1 percent or 2 percent of Montana taxpayers to deal with problems faced by the entire state.

“To go after the top 1 percent to 2 percent of taxpayers to generate more money seem to me to be punitive,” Story said.

He said the Legislative Fiscal Division and governor’s Office of Budget and Program Planning both agree that Montana faces a short-term revenue problem.

“Why would the Legislature want to make a permanent tax increase to solve a short-term problem?” Story said.

The chamber’s Bridger Mahlum said a newer higher tax rate on the top taxpayers could cause wealthy people, entrepreneurs and job providers to move to a state with no or lower income tax rates.

The committee didn’t vote immediately on HB 452. It earlier tabled HB 330 by Rep. Kim Abbott, D-Helena, to create a new tax bracket of 8.9 percent starting at a taxable income of $400,000.

Gov. Steve Bullock’s proposed budget relies on $37 million in new revenue the next two years from a bill to create a new tax bracket for Montanans with taxable income exceeding $500,000. The bill hasn’t been introduced yet.