HELENA – A top Republican leader is proposing to cut state income tax revenues by $90 million to $120 million a year, a move he said would help stimulate the Montana economy.
Senate Majority Leader Art Wittich, R-Bozeman, presented his Senate Bill 170 to the Senate Taxation Committee on Wednesday. The panel took no immediate vote on the bill.
As drafted, it would lower the state’s top income tax rate to 5.9 percent from the current 6.9 percent for people with taxable income exceeding $10,800 annually. He would cut the capital gains credit rate to 1 percent and increase the corporate income tax rate to 7.75 percent from the current 6.75 percent.
“It will expand incentives and opportunities for the people of Montana,” Wittich said. “If you really want to spur economic growth in Montana, this will be the most important bill of the session.”
The Revenue Department estimated the bill would cut state tax revenues by $91.7 million in fiscal 2015, $81.9 million in 2016 and $88.3 million in 2017.
The Montana Taxpayers Association’s Nancy Schlepp opposed the bill’s provision to raise the corporate license or income tax. She said Montana’s corporate income tax rate already is among the highest in the region and should be lowered, not raised.
Schlepp said she asked a tax authority at the National Tax Foundation what tax change is “the biggest bang for the buck” to stimulate a state’s economy.
“He said lowering your corporate income tax rate is always the best way to stimulate your economy,” Schlepp said. “And so this would be just the opposite of that.”
Wittich told reporters later he would be willing to drop the proposed corporate income tax increase because of the state’s strong general fund balance. The surplus is projected to be $450 million on June 30.
If he makes that change, Wittich’s bill would reduce state income taxes by $120 million in fiscal 2015, $108.9 million in 2016 and $114.6 million in 2017, the Revenue Department estimated.
Tara Veazey of the Montana Budget and Policy Center also opposed the bill, saying it would “undoubtedly make the regressivity of our tax structure even more severe.”
“The truth is that tax cuts aren’t inherently good or bad,” she said, adding that the center supports some and opposes others. “But they always come with an economic and fiscal tradeoff. Our collective investments in education and infrastructure and safe and healthy communities all profoundly attract our ability to attract businesses and build an educated workforce. If we’re not careful, ongoing tax cuts threaten our long-term ability to invest in those things that can help us build a stronger economy.”
Wittich disputed the Revenue Department’s estimates of how much his bill would reduce state tax collections.
“The assumptions do not include the likelihood of additional economic growth and commensurate increased revenue,” he wrote in a rebuttal. “Tax relief (in mid-2000s) spurred growth and revenues.”
He told the committee his bill would cut state income tax collections by about 14 percent, while Democratic Gov. Steve Bullock’s budget proposes a 13 percent increase.
“I think the members of this committee have to ask themselves whose money is it: the person who made the income through their labor or is it the government’s?” Wittich said.
No one from the Bullock administration testified on the bill.
Bullock has proposed two major tax initiatives. One would provide a one-time, $400-per-homeowner property tax rebate, which would cost the state treasury $100 million.
The other would eliminate the property tax on business equipment for companies whose aggregate equipment is valued at $100,000 or less. That would reduce state revenues by $10.4 million over the next two years.
Missoulian State Bureau reporter Charles S. Johnson can be reached at (406) 447-4066 or at email@example.com.