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Yahoo
04-04-2025
- Business
- Yahoo
Three income tax bills pass first hurdles— but none are what the governor ordered
Photo illustration by Getty Images. Montana Gov. Greg Gianforte has made it clear that he wants the Legislature to pass income tax cuts for the third time since his election in 2020. This session, he wants to lower the state's top tax rate — the rate most Montanans pay — by a full percentage point during the next two years. But the legislation he is backing — touted in his budget proposal last year, his State of the State address in January, and in multiple press conferences throughout the legislative session — has stalled in the Senate, while different proposals that take a narrower focus of lowering taxes for middle-income earners have received bipartisan support from lawmakers. The governor's preferred proposal, Senate Bill 323, carried by Sen. Josh Kassmier, R-Fort Benton, had a hearing before the Senate Taxation Committee earlier this week. The bill would lower the top tax bracket (Montana has two brackets) from 5.9% to 5.4% next year, and down to 4.9% the following year. It would also expand the earned income tax credit from 10% to 15%. The bill was tabled in committee. On Wednesday, Kassmier made a motion to blast the bill out of committee to the floor in order to let the entire Senate debate its merits, but the motion failed. 'While I join all Montanans in being disappointed with the Senate's vote yesterday, I am optimistic that by working together, we can get (income tax cuts) done for the Montanans who sent us here. And we must,' Gianforte said at a press conference on Thursday. Meanwhile, two competing proposals that were also tabled in committees, Senate Bill 203, brought by Sen. Mike Yakawich, R-Billings, and Senate Bill 546, brought by Sen. Dave Fern, D-Whitefish, were blasted to the floor on Wednesday. Yakawich's bill passed an initial Senate vote earlier this week 47-3 before the Senate Finance and Claims Committee tabled it. Sen. Greg Hertz, R-Polson, who leads the taxation committee, said he supported the 'good bipartisan bill' coming back to the floor for a final vote, drawing contrasts to Kassmier's bill. 'We know 323 was tabled. And the reason why? It started at the top,' Hertz said. 'We're starting at the bottom here. It's a middle class tax cut. If you don't want to bring this to the floor, you're voting against a middle-class tax cut.' Rather than cut the top tax bracket rate, SB 203 would expand the lower bracket — taxed at 4.7% — to include individuals making as much as $100,000. For married couples filing jointly the bracket delineation would be at $200,000, which Yakawich has said will cover up to the 90th percentile of earners. SB 203 passed the Senate in a final vote Thursday 31-19 and was sent to the House. In convincing the Senate to hear SB 546 on the floor, Fern called it the 'largest middle-class tax cut that's being presented.' 'I have one of the best kept secrets in this chamber. This is great competition for middle class tax cuts. And I would love the opportunity to present this innovative, interesting, out of the box bill to all of you.' The blast motion was successful, and the Senate debated the measure during Thursday's session. Rather than tinker with the income tax rates, Fern's proposal would create an income-based tax credit targeting exclusively the lower and middle income taxpayers. While he called the text a 'mouthful,' Fern said the Middle Income Tax Reduction, MITR, would subtract a percentage of a filer's tax liability, starting at 4.7% of taxable income and stepping down a percentage for additional income. Using a teacher filing jointly as an example, with a Montana taxable income of $70,000, Fern said those folks would receive about $930 as a tax credit. 'I suggest that MITR is the best bill that targets what I call a silent majority of our citizens and taxpayers. The MITR assures savings and spending so that dollars stay at home,' Fern said. 'We're not treating our middle class taxpayers, I think, with the respect they deserve.' Speaking in opposition to the bill, Hertz said that lawmakers faced a decision over two bills that both cost $200 million a year. '(We) can't have both of them. We're going to have to choose one or the other. Although we might be able to do a hybrid method.' He said Fern's bill was too complicated by essentially creating '50 new tax brackets' due to the percentage-graded credit. He also expressed concern that it would make it harder for tax software companies to tailor their products for Montana, which presents a small portion of their customer base. 'It doesn't meet my simplification test,' he said. In support, Minority Leader Pat Flowers, D-Belgrade, said he was happy to see Democrats bring forth an income tax bill — which the party traditionally has opposed — specifically one so focused on lower-income earners. 'For years, the income tax reduction proposals that have come here have done the same thing. They've primarily benefited taxpayers at the highest level,' Flowers said. 'And who needs an income tax reduction? Is it somebody making $500,000 a year? No.' Fern said that the bill could be amended to mesh with Yakawich's, if the Legislature found that to be the best compromise on policy. The chamber passed the bill 28-21. The other major income tax cut bill moving through the Legislature is House Bill 337, introduced by Speaker of the House Brandon Ler, R-Savage. Ler's bill falls in between the Yakawich proposal and the governor's plan, It contains both a slight reduction in the top tax rate from 5.9% to 5.4%, and an expansion of the lower, 4.7% bracket up to $70,000 for individual filers, and $100,000 for joint filers. Tax day is less than two weeks away, and on the House floor Monday, Ler said he'd heard from many folks who were getting hit on their taxes from last year. His bill, he said, would benefit everyone. 'This bill is aimed to lowering all income tax brackets. This will help all Montanans whether you're low income or high income,' Ler said. The measure passed along party lines. In his press conference Thursday, Gianforte said that proposals aimed at expanding the lower tax bracket 'only benefit a portion of Montanans.' 'Carving out special groups and giving special breaks to special interests or special groups of Montanans is just not fair,' the governor said. Pushed by reporters whether he was concerned that higher income Montanans wouldn't receive a tax cut, Gianforte reiterated that his ultimate goal was to create a single, flat-tax rate for everyone. 'It's just basically fair,' he said. 'You have a fairer system because everyone shares the burden based on their income level.' He said that while his goal was to get a full 1% decrease in the top tax rate, 'there can be honest debate about how much to reduce the top rate.' He added that no lawmakers had approached him to discuss alternate tax plans. 'If there's a concern in the Legislature, let's have a discussion,' he said. 'None of those legislators have come to me to talk to me about an alternative proposal, so I would welcome the discussion. Let's get around the table and figure this out for the people of Montana.'
Yahoo
12-02-2025
- Business
- Yahoo
Lawmakers debate Republican income tax relief proposals
The Montana Department of Revenue located at 340 Last Chance Gulch in Helena, Montana (Photo by Darrell Ehrlick of the Daily Montanan). The middle class is often a forgotten segment of the population, says Sen. Mike Yakawich, a Billings Republican. Instead, policy often focuses on the very affluent or 'those who unfortunately don't have a lot.' 'But that middle class, we have to let them know we love them, we care about them, we want to help them,' Yakawich said in a conversation with Senate President Matt Regier on the Montana Majority Report podcast on Tuesday. Regier, a Kalispell Republican, requested Senate Bill 203, which Yakawich is carrying through the chamber, to adjust income tax brackets in the state in a way that prioritizes middle-class Montanans. The bill is just one aimed at revising income tax rates working its way through the Legislature. Two measures, brought by GOP leadership, focus on giving cuts to middle-class earners, while Montana's Republican governor continues to push for a larger, top-down approach. Yakawich told the Senate Taxation Committee earlier this month that he characterizes his bill as the 'millennial bill,' aimed at young professionals in the state. He has five kids of his own, four of whom are married, with substantial, six-figure household incomes. 'When I was their age, that was a lot of money,' Yakawich said. 'Now, that's not a lot of money for someone who has children, who starts looking at (buying) a home.' Montana currently has two income tax brackets — one at 4.7% and one at 5.9% — which split at roughly $21,000 for an individual filer. The state used to have a six-bracket marginal tax system until the Legislature condensed it during the 2021 session. SB 203 would expand the lower bracket to comprise individuals making up to $100,000 — covering up to the 90th percentile of earners, according to Yakawich. For married couples filing jointly the bracket delineation would be at $200,000. The tax cut would result in between $56 and $616 in savings for individuals in the 60th through 90th percentiles, according to data from the Legislative Fiscal Division. 'That can cover a lot of diapers, it can cover a lot of costs for families who are growing and struggling and trying to make it,' Yakawich said. 'It's important for us here in Montana to focus on those young couples, especially, who are really striving to make ends meet and be successful, have a good job and pay their taxes.' According to the bill's fiscal note, the state would receive roughly $250 million less from taxpayers annually by 2029. 'The intent is to have the best bill for the state of Montana, for our citizens,' Yakawich told the committee, acknowledging the other efforts to revise income tax rules. 'This is one effort.' Republican Gov. Greg Gianforte has a different approach to income taxes — fewer and lower is good, but none might be best. For months since Montanans reelected Gianforte to a second term, the governor has outlined his goal to enact the largest income tax cut in Montana history, building on top of the work the state had done during his first four years in office. The governor had previously touted ushering in a combined $1 billion in income and property tax relief after the last legislative session. 'We've lowered the rate that most Montana taxpayers pay from 6.9% to 5.9% but there's more we can and should do,' Gianforte said at a press conference last week. 'We must continue reducing the tax that most Montanans pay, and we must continue to flatten our taxes.' The governor's tax plan, which is still in draft form, would lower the top income tax rate by half a percentage point each of the next two years. By the next biennium, the state's two brackets would be 4.7% and 4.9% — one step away from a flat tax rate that all Montanans pay. That's the governor's ultimate goal, which he said would give Montanans 'greater certainty into the future.' 'Let's be honest about what the income tax is — it's a tax on work. It's a tax on the fruits of their labor. We shouldn't tax work more than we have to,' Gianforte said at a Jan. 28 press conference. 'By reducing the income tax, hard working Montanans will keep more of what they work so hard to earn.' At that press conference, which was conducted with Grover Norquist, president of Americans for Tax Reform, Gianforte compared Montana to nearby states in the Mountain region. Of those states, Wyoming, Nevada and South Dakota have no income tax, while Idaho, Utah, Colorado and Arizona all have a single, flat income tax rate. And out of the latter states, the tax rate ranges from 2.5% to Idaho's 5.8%. However, Montana is one of four states in the country without a sales tax — every bordering state has one, with North Dakota's the highest at more than 7%. 'Montanans are losing out,' Gianforte said. 'They're losing out on keeping more of what they earn, and they're losing out on the opportunities that come from businesses of all sizes.' Norquist, who for decades has championed a pledge among national Republicans to oppose any new taxes, said that moving toward a flat-tax rate shows potential investors and business owners that Montana has a policy of cutting taxes, and they are less likely to be 'badly surprised this year, next year, or 10 years from now,' with a rate hike. He also touted the states that had done away with income tax altogether, and the growing number of lawmakers who supported heading in that direction. Gianforte's plan would be the 'the largest income tax cut in state history,' with $850 million in permanent tax relief, according to the governor's office. Legislative fiscal analysts estimate the tax policy changes would reduce general fund revenue collections by $398 million in the 2027 biennium. But the Governor said he isn't worried about future impacts to the state's budget, saying that under his administration, the state has not grown spending while GDP has increased — leading to both structural and one-time surpluses. 'We're not cutting anything. We are looking for efficiency opportunities, but we've fully funded essential services,' he said. However, the bulk of the tax cuts — in terms of actual dollars — would be implemented among the state's highest earners. An analysis by the Montana Budget and Policy Center indicates that the wealthiest 1% of Montanans would see roughly $10,000 in tax breaks under the policy, while individuals making $50,000 or less would receive less than $100. Gianforte said his proposal to lower the top tax rate, combined with expanding the earned income tax credit, is the only proposal that would reduce taxes for Montanans at every income level, but he will look at any income tax reform that passes the Legislature. 'Ultimately, there's different routes to get to a flat tax at a lower rate, and we'll consider those other bills if they get to my desk,' Gianforte said. One other proposal that got a committee hearing last week was House Bill 337, brought by Speaker of the House Brandon Ler, R-Savage. Ler's bill took more of a middle ground approach. It proposed raising the lower tax bracket — the 4.7% rate — to $70,000 for individual filers, while also lowering the top rate down to 5.65% The measure was tabled in the House Taxation Committee on Tuesday in a 20-1 vote.
