Montana taxes income of working poor more harshly than any state, report says

2009-11-05T02:30:00Z Montana taxes income of working poor more harshly than any state, report saysMissoulian State Bureau
November 05, 2009 2:30 am  • 

HELENA - Montana taxes the incomes of the working poor harsher than any state, a report Wednesday said.

Working couples with two children in Montana start owing income taxes at a lower income than any other state, a report issued by the Center on Budget and Policy Priorities, a left-leaning group in Washington, D.C.

The report said Montana is one of only six states to impose income taxes on people living in severe poverty and one of just seven states that taxes people earning the minimum wage, said Tara Veazey, director of the Montana Budget and Policy Center, which has ties to the national center.

"Montana's income tax system has the unfortunate result of pushing hard-working families living in poverty further into poverty," Veazey said.

A growing number of states have adopted state earned income tax credits to help people trying to work their way out of poverty, Veazey said. These are refundable, dollar-for-dollar reductions in tax liability that end up supplementing the wages of low-income workers.

"State earned income tax credits, like the federal credit, have enjoyed bipartisan support in many state legislatures," she said. "Unfortunately, the Montana Legislature has so far rejected attempts to enact the tax credit here."

Efforts by Helena Democratic Rep. Mary Caferro and Sen. Christine Kaufmann to pass an earned income tax credit failed earlier this year.

The national report found that Montana, despite how its low-income tax threshold, still has a less regressive tax system than many states. The reason is that Montana, unlike most states, doesn't have a state sales tax, which the center said takes a bigger share of the working poor's income than income taxes.

"We hope that the report will remind policymakers in Montana of the ongoing opportunities to reform our income tax system and other elements of our tax system in ways that reduce taxes for hard-working Montanan families already struggling just to get by," Veazey said.

She said it's important for the state to invest in education, health and other services and public works to promote healthy communities across the state.

"However, we need to support those priorities with a tax system that better reflects families' ability to pay," Veazey said.

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