By Keila Szpaller DAILY MONTANAN
Get ready for a few extra pizzas every year — or maybe a tank of gas.
If you’re not rich, that’s about the size of the benefit you get from a major Republican tax bill, Margaret MacDonald said with Big Sky 55+ of Billings.
According to an estimate by the Montana Budget and Policy Center, middle-income earners in Montana earn about an extra $50 a year. The center said those earning $570,000 or more, the wealthiest, will receive nearly $6,000 on average.
“It’s … a generosity for the wealthiest millionaires, and its benefits are meagre indeed for middle- and low-income households,” said MacDonald of Big Sky 55+, which advocates for seniors.
But members of the Senate Tax Committee instead agreed with supporters of the income tax cut bill, voting 7-5 last week to advance Senate Bill 121.
The bill would reduce the state’s top income tax rate from 6.5% to 5.9%, which according to sponsor and Sen. Becky Beard, R-Elliston, “will help make Montana a more competitive place for our economy and our standard of living.” .”
The bill would also increase the recoverable earned income tax credit from 3% of the federal credit to 10%. This loan helps people with lower incomes.
Beard noted that she herself refused such loans until meeting with the Republican Gianforte administration, who showed her the change would help low-income earners.
In support of the bill, Duane Williams of the Montana Trucking Association said the lower rate will help many workers it represents.
“The trucking industry has over 21,000 jobs here in Montana that would benefit,” Williams said.
In this session, Republicans are introducing a number of tax proposals, and lawmakers pushed some other related bills as well as SB 121 last week.
However, not every bill sails through as proposed, and Gov. Greg Gianforte’s stamp of approval has not guaranteed a slam dunk with the GOP supermajority.
For example, representatives on the House Taxation Committee temporarily introduced House Bill 222, a property tax refund bill that the governor’s office had touted as a $500 million proposal and “the largest federally administered tax refund in the country.”
Before moving forward, the House Taxation Committee cut the housing rebate from up to $1,000 to up to $500 for 2022 and 2023. It was heard in House Appropriations on Monday.
Last week at the SB 121 hearing, representatives from the Montana Taxpayers Association, the Montana Economic Developers Association, the Montana Chamber of Commerce and others voiced support.
Proponents said it was time for an income tax cut, arguing that those who benefit could invest in businesses, spur entrepreneurship and create even more good jobs in the state.
Nicole Rolf of the Montana Farm Bureau Federation said the tax break would help farmers and ranchers.
“Those dollars that we keep in our pockets can be invested in the community to improve our businesses or to support our own families,” Rolf said.
The tax note said the bill will cost the general fund $28.3 million in 2024, then $159.4 million in 2025, and more in years to come.
However, Ryan Osmundson, the governor’s budget director, said the bill fits within the budget that the governor’s office has proposed.
He said it was offering tax cuts for nearly all Montanans, the government had been conservative in its budget projections, and some could argue for an even bigger cut.
“That’s a significant reduction,” Osmundson said. “But we planned that. We are very confident that this is a very measured approach and it is doing a good job of helping the citizens of Montana.”
In response to a question from Sen. Shannon O’Brien, D-Missoula, about evidence that tax cuts benefit business at the top, Osmundson cited in part the policies of Arthur Laffer, credited as the architect of Reaganomics.
Academic economists consider Laffer to be more of an influential figure than an informed theorist.
But Osmundsom said the proposal is also a continuation of ongoing Republican efforts to cut taxes, and he said it was particularly helpful amid inflation.
“We’ve been trying to do this for decades, and we’re very pleased to have this in our budget and as part of the governor’s proposal,” Osmundson said.
Beard disputed the idea that even low-income earners would not benefit. You’re not just saving $50, she said; They will be offered opportunities for better jobs as the economy grows.
Rose Bender of the Montana Budget and Policy Center noted that those on lower incomes would see “a few hundred dollars at most” from the loan.
Overall, Bender said the sizeable cuts proposed by multiple bills will hurt the state’s ability to support seniors, people with disabilities and others.
“These proposals will have long-term implications for our ability to invest in our fellow Montana residents,” Bender said.
She and other opponents said the legislation was a giveaway for rich people. They argued that recent government stimulus dollars, a possible downturn in the economy in the future, or some of Montana’s obvious needs now are not being addressed.
“We’re watching a train wreck in slow motion as Montana’s long-term care facilities close almost monthly,” said MacDonald of Big Sky 55+. “You have to know that dozens are hanging by a thread until what happens in Helena in the next three months.”
Erik Burke of the Montana Federation of Public Employees said he appreciated the cuts were targeting both ends of the income spectrum and it was clear a tax cut would take place this session.
However, he said the size of the tax cut is “too ambitious” given Montana’s boom and bust cycles, and he said he fears future impacts on public employees due to the significant revenue reduction.
“We’re concerned that in a recession, in an economic downturn, that income tax cut will haunt us again,” Burke said.
Senator Mary Ann Dunwell, D-Helena, introduced a few amendments to address concerns about the bill, but they failed. It would have let the tax cut expire after six years if the economy took a hit, a move it said would be fiscally prudent.
However, Sen. Greg Hertz, R-Polson, argued that lawmakers are already in a position to address future issues because they meet every two years. He also said the governor’s office is increasing reserve funds to help stabilize the budget.
In a further amendment Dunwell wanted to insert a “middle income class”. She argued this would create fairness in the bill and “raise all boats”.
“This benefits lower-income folks and upper-income folks, but not the hard-working Montans in the middle,” Dunwell said. “So this (change) is the middle.”
However, Hertz argued against the change that he values the people at the top of the pile because they are already making big contributions.
“I love all these people in the top 10% because they pay 58% of our income taxes, and that means the rest of us don’t have to pay as much,” said Hertz, the committee’s chair.
At the hearing, Rebecca Meyers of the Billings Chamber of Commerce said the cut would help small businesses in the Yellowstone County area stay competitive and estimated those taxpayers would save $20.5 million in 2024.
“The cut in this[rate]will finally lift us off the top of the podium on income tax rates among many neighboring states,” Meyers said.
OTHER TAX INVOICES
The Senate Tax Committee gave the green light to Senate Bill 124, albeit with slightly less controversy and a 9-3 vote. Hertz, the sponsor, said it will incentivize companies to relocate and expand into Montana rather than penalizing local businesses.
Hertz noted a bill aimed at helping seniors with property taxes, Senate Bill 110 by Senator Keith Regier, R-Kalispell, is awaiting change.
The government’s “Golden Years” tax aid program is designed to help seniors who are at least 80 years old and live in their own homes.
Basically, SB 110 would freeze the property’s taxes at its appraised value when a senior applies for the assistance. But if the senior expands their residency, a reset would take place.
At last week’s hearing, Joe Briggs, a Cascade County commissioner and past president of the Montana Association of Counties, supported the bill. He said most seniors have fixed incomes.
“We believe this is a bill that will help protect what is perhaps one of our most vulnerable economic subgroups in our communities,” Briggs said.
According to a financial note, the bill will cost the general fund $5 million, which the government says isn’t much given the nationwide surplus of $2.8 billion.
Rose Bender of the Montana Budget and Policy Center said many legislators have spent time looking at the home ownership tax system and she agrees it needs fixing, but she opposed SB 110.
She said it’s not geared toward low-income people, nor is it available to renters who pay property taxes through their rent.
Sen. Denise Hayman, D-Bozeman, asked Governor if he considered an income threshold.
Governor said no.
Just because a person’s appraised worth has skyrocketed doesn’t mean they’re being swamped in cash, he said. In Montana, he said, the situation includes farmers and ranchers with valuable land but low incomes.
“We’re just talking about bringing some predictability into the lives of these elderly people when it comes to property taxes,” Regier said.
Later in the week, however, Hertz said it was considering some changes, including changes that would take income thresholds into account.