HELENA – A major proposal to revamp Montana’s income tax won support Thursday from some groups, but faced opposition from others seeking to keep their tax breaks.
At issue before the Senate Taxation Committee was Senate Bill 282, by Sen. Bruce Tutvedt, R-Kalispell, who heads the committee.
“Right now, Montana has one of the most complicated income tax systems,” he said.
Tutvedt said his bill, based on the Colorado’s income tax, simplifies the tax, and lowers rates and tries to be revenue-neutral by removing most tax exemptions and credits, although the bill ended up costing some money.
Tax rates under Tutvedt’s bill would be at 4 percent on joint returns with taxable income of up to $15,600 and 5.9 percent on taxable income over $15,600. For single and married people filing separately, the rates would be 4 percent of taxable income up to $7,800 and 5.9 percent of table income over $7,800.
Montana currently has seven income tax brackets each with its own tax rate. The lowest rate is 1 percent on income up to $2,700. The highest is 6.9 percent for those with taxable income more than $16,400.
The fiscal note estimates the bill would reduce general fund revenue by $7 million in the 2014-2015 period and by $9 million in the next two years combined. It would ultimately reduce Revenue Department costs by $1.3 million a year and eliminate 16 jobs.
SB282 would use federal taxable income, with a short list of adjustments, as the base for the state individual income tax, the fiscal note says. It would eliminate some tax credits and reduce corporate license taxes.
“This is going to be a very clean, simple, low tax rate, income tax in Montana,” Tutvedt said.
George Olsen of the Montana Society of Certified Public Accountants endorsed the bill, saying it would provide a “much-needed simplification” to Montana’s income tax.
Also supporting the bill were representatives of the Montana Taxpayers Association, Montana Chamber of Commerce and Montana Medical Association.
“We in the past have supported some of the tax credits that are repealed,” Glenn Oppel of the Montana Chamber of Commerce said.
The chamber believes the simplification in SB282 outweighs the need for the credits, he said.
But a number of groups advocating for some tax credits saw it differently.
Ben Brouwer, representing the Montana Renewable Energy Association and Alternative Energy Resource Organization, defended the value of the energy conservation credit. He said people now can spend several thousand dollars on new insulation, more energy-efficient windows or new boilers under the program.
“They get a tax credit and will see savings in their energy bills month after month and someone in the construction industry will get work,” Brouwer said.
He said dropping the tax credit is “a bad move for our Montana small businesses and our taxpayers.”
Agreeing about the need to preserve various tax credits were representatives of the Montana Environmental Information Center, Northern Plains Resource Council and Montana Conservation Voters.
Representatives of the Recycle Montana and the Motion Picture Association of America each supported tax credits that help those particular businesses.
Leo Berry, representing Association of Retired Public Employees, said the bill would eliminate a $3,600 exemption for certain retirees that phases out on incomes over $30,000. He urged lawmakers to keep that benefit.
“You’re really talking about the lower-income people on pensions,” Berry said. “It would behoove you to find how many people are using that credit.”
The committee didn’t vote on the bill immediately.