By Keila Szpaller DAILY MONTANAN
Get ready for a couple of extra pizzas every year—or maybe a tank of gas.
If you’re not rich, that’s about the extent of the benefit you’ll get from a key Republican tax bill, said Margaret MacDonald, with Big Sky 55+ of Billings.
People earning a median income in Montana will get an extra $50 or so a year, according to an estimate from the Montana Budget and Policy Center. The center said those earning $570,000 or more, the wealthiest, will get nearly $6,000 on average.
“It is … largesse to the richest millionaires, and its benefits are meager indeed for middle-income and low-income households,” said MacDonald, of Big Sky 55+, which advocates for seniors.
But members of the Senate Tax committee agreed with proponents of the income tax reduction bill instead, and they voted 7-5 last week to advance Senate Bill 121.
The bill would decrease the state’s top income tax rate from 6.5% to 5.9%, which sponsor and Sen. Becky Beard, R-Elliston, said will “help make Montana a more competitive place for our economy and our standard of living.”
The bill also would increase the refundable Earned Income Tax Credit from 3% of the federal credit to 10%. This credit helps people who earn lower incomes.
Beard noted she herself used to oppose such credits until she met with the Republican Gianforte Administration, which showed her the change would help lower earners.
In support of the bill, Duane Williams, with the Montana Trucking Association, said the lower rate will help many workers he represents.
“The trucking industry has over 21,000 jobs here in Montana that would benefit from this,” Williams said.
This session, Republicans are presenting a number of tax proposals, and legislators pushed ahead a couple of other related bills last week as well as SB 121.
However, not every bill is sailing through as proposed, and Gov. Greg Gianforte’s stamp of approval hasn’t guaranteed a slam dunk with the GOP supermajority.
For example, in the House Taxation committee, representatives temporarily tabled House Bill 222, a property tax rebate bill the Governor’s Office had touted as a $500 million proposal and “the largest state-administered tax rebate in the country.”
Before advancing it, the House Taxation committee cut the residential rebate from up to $1,000 to up to $500 for the 2022 and 2023 years. It was heard in House Appropriations on Monday.
Last week at the hearing on SB 121, representatives from the Montana Taxpayers Association, Montana Economic Developers Association, Montana Chamber of Commerce and others spoke in support.
Proponents said it’s about time for income tax reduction, and they argued those who benefit will be able to invest in businesses, drive entrepreneurship and create even more good jobs in the state.
Nicole Rolf, with the Montana Farm Bureau Federation, said the tax relief will help farmers and ranchers.
“Those dollars we keep in our pockets can be invested in the community to improve our businesses or to help support our own family,” Rolf said.
The fiscal note said the bill will cost the general fund $28.3 million in 2024, then $159.4 million in 2025 and even more in future years.
However, Ryan Osmundson, the governor’s budget director, said the bill fits into the budget the Governor’s Office has proposed.
He said it offers tax cuts to nearly all Montanans, the administration has been conservative in its budget projections, and some might argue for an even greater cut.
“It is a significant reduction,” Osmundson said. “But we have budgeted for that. We feel very confident that this is a very measured approach, and it does a good job helping the citizens of Montana.”
In response to a question from Sen. Shannon O’Brien, D-Missoula, about evidence tax cuts at the top benefit the economy, Osmundson pointed in part to the policies of Arthur Laffer, credited as being the architect of Reaganomics.
Academic economists consider Laffer more of an influential personality than a sound theorist.
But Osmundsom said the proposal is also a continuation of an ongoing effort by Republicans to reduce taxes, and he said it’s particularly helpful given inflation.
“We’ve tried to do this for decades, and we’re really excited to have this in our budget and part of the governor’s proposal,” Osmundson said.
Beard disputed the idea that lower income earners don’t benefit, either. They aren’t just saving $50, she said; they are being presented opportunities for better jobs as the economy grows.
The Montana Budget and Policy Center’s Rose Bender noted those at lower income levels would see “at most a few hundred dollars” from the credit.
Altogether, Bender said the sizable cuts being proposed through multiple bills will affect the state’s ability to support seniors, those with disabilities and others.
“These proposals will have long-term ramifications on our ability to invest in our fellow Montanans,” Bender said.
She and other opponents said the legislation is a giveaway to rich people. They argued it doesn’t take into account recent federal stimulus dollars, a possible downturn in the economy in the future, or some of Montana’s glaring needs now.
“We are watching a slow-motion trainwreck as Montana long-term care facilities close on an almost monthly basis,” said MacDonald, with Big Sky 55+. “You need to know there are dozens hanging by a thread pending what happens in Helena the next three months.”
Erik Burke, with the Montana Federation of Public Employees, said he appreciated the cuts were targeted to both ends of the income spectrum, and it’s clear a tax cut will take place this session.
However, he said the level of tax cut is “overly ambitious” with Montana’s boom and bust cycles, and he said he feared repercussions to public employees in the future with the significant revenue reduction.
“We worry that if there is a recession, if there are economic downturns, cutting this level of income tax is going to come back to haunt us,” Burke said.
Sen. Mary Ann Dunwell, D-Helena, pitched a couple of amendments to address concerns about the bill, but they failed. One would have put an end date on the tax cut after six years in case the economy takes a dive, a measure she said would be fiscally prudent.
Sen. Greg Hertz, R-Polson, however, argued the legislature already is positioned to address future problems because it meets every other year. He also said the Governor’s Office is increasing reserve funds to help stabilize the budget.
In another amendment, Dunwell wanted to insert a “middle income bracket.” She argued doing so would create fairness in the bill and “raise all boats.”
“This benefits the folks in the lower income bracket and benefits the folks in the upper income bracket, but not hardworking Montanans in the middle,” Dunwell said. “So this (amendment) is the middle.”
In arguing against the amendment, though, Hertz said he appreciates the people at the top of the heap because they’re making big contributions already.
“I love all those people in the top 10% because they are paying 58% of our income taxes, and that means the rest of us don’t have to pay as much,” said Hertz, chair of the committee.
At the hearing, Rebecca Meyers with the Billings Chamber of Commerce said the cut would help small businesses in the Yellowstone County area compete and estimated it would save those taxpayers $20.5 million in 2024.
“Reducing this (rate) will finally take us off the top of the income tax rate podium among many neighboring states,” Meyers said.
OTHER TAX BILLS
The Senate Taxation committee greenlighted Senate Bill 124, albeit with a bit less controversy and a 9-3 vote. Hertz, the sponsor, said it will give businesses an incentive to relocate and expand into Montana instead of penalizing homegrown companies.
Hertz noted a bill that aims to help seniors with property taxes, Senate Bill 110 by Sen. Keith Regier, R-Kalispell, is awaiting amendments.
Regier’s “golden years” property tax assistance program is intended to help seniors who are at least 80 years old and live in their own homes.
Basically, SB 110 would freeze taxes of the property at its appraised value when a senior applies for the help. But if the senior expands their residence, a reset would take place.
At the hearing last week, Joe Briggs, a Cascade County commissioner and past president of the Montana Association of Counties, spoke in support of the bill. He said most seniors are on fixed incomes.
“We think this is a bill that helps protect one of our most fragile, perhaps, economic subgroups of our communities,” Briggs said.
A fiscal note estimates the bill will cost the general fund $5 million, which Regier said is not much in the context of the statewide surplus of $2.8 billion.
Rose Bender, with the Montana Budget and Policy Center, said many legislators have spent time looking at the residential property tax system, and she agrees it needs fixing, but she opposed SB 110.
She said it isn’t targeted to lower income people, nor is it available to renters, who pay property taxes through their rent.
Sen. Denise Hayman, D-Bozeman, asked Regier if he had considered an income threshold.
Regier said no.
Just because someone’s appraised value shot up doesn’t mean they’re awash in cash, he said. In Montana, he said the situation includes farmers and ranchers with valuable land but little income.
“We’re just talking about getting some predictability in these elderly people’s lives when it comes to property taxes,” Regier said.
Later in the week, however, Hertz said he was considering a couple of amendments, including changes that would take income thresholds into consideration.