Legislature Debates Governor's Tax Cut Proposals
Feb 12, 2021
Montana Public Radio
Montana’s governor is calling this "Tax Reform Week." Gov. Greg Gianforte’s proposals to change a slew of tax policies for residents and businesses got their first hearing in the state Legislature. An income tax cut proposal received the most debate Thursday morning.
Montana’s first Republican governor in 16 years has proposed a broad cut to income taxes, elimination of the state’s capital gains tax for some new businesses that create jobs, and elimination of the business equipment tax for some.
Gianforte’s budget director, Kurt Alme, explained the administration's motivation to cut income taxes to Senate Taxation Committee members Thursday.
"By proposing this bill and others being heard here today, Governor Gianforte is sending a message to entrepreneurs and business leaders in Montana and across the country: We want you and your good paying jobs."
House Bill 198
would cut the state’s top marginal income tax rate for those making over about $18,000 from 6.9% to 6.75%. It would impact over half of the people filing taxes in the state. It would also result in a roughly $30 million revenue loss for the state.
The Legislative Fiscal Division has found that Gianforte’s proposed budget would lead to a 2% negative structural balance
— a deficit. Alme acknowledged that in prior meetings, and said he’s hopeful the state will be able to add enough new revenue to offset that deficit.
Patrick Barkey, director of the Bureau of Business and Economic Research, offered a preliminary analysis of the proposed income tax cut. He says the cut is likely to add about 350 jobs in the state and grow personal income by roughly $15 million.
But, "That growth would not pay for the tax cut, there’s no way it would pay for the tax cut, but it would close the gap some."
Barkey said this is only a partial analysis, and that a complete one will require accounting for the methods used to balance the state’s budget. Gianforte has put forward proposals to decrease state spending, like requiring all state agencies to absorb a 4% staff vacancy savings.
Sen. Greg Hertz, a Republican from Polson, is sponsoring the income tax cut bill, and says it'll create a more competitive tax environment in Montana for businesses looking to open or relocate.
"Montana currently has the second highest top marginal rate in the Rocky Mountains, we’re just slightly less than Idaho."
Montana is also the only state in the Rocky Mountains, and one of the few states in the nation, without a sales tax.
Representatives of industries varying from logging to retail overwhelmingly support the income tax cut measure, saying it would lead to economic prosperity in the state.
Groups that advocate for low-income people and groups that have been historically marginalized widely opposed the proposal, saying the policy would benefit the wealthy disproportionately and have little benefit to middle and low-income earners.
The Montana Chamber of Commerce, the Montana Farm Bureau Federation and the Montana Taxpayers Association were among about 20 supporters of the bill who urged lawmakers to approve it.
Tammy Johnson is the executive director of Montana Mining Association.
"While some may not be sympathetic to wage earners with higher income, we are important for paying a lot of what the state needs to operate, and we spend a great deal of money out in the economy," she says.
The Montana Budget and Policy Center, a left-leaning organization that often advocates for policy benefiting low income people, women and people of color, offered its own analysis of the tax cuts. It found that people who make between $23,000 and $40,000 per year will see a one dollar savings on their income taxes each year.
It found that people who make more than $500,000 per year will see more than $1,000 savings.
Wealthy people pay more in taxes in Montana and they subsequently see a higher cut when it’s applied across the board.
Heather O’Laughlin with the budget and policy center spoke in opposition of the bill, with about 20 other opponents, saying the state can’t afford it.
"This proposal will have long-term ramifications on our ability to invest in education, senior services, public safety."
Lawmakers have yet to vote on the legislation.