Wealthiest Should Finally Pay their Fair Share

A recent investigation found that many of the wealthiest Americans pay little to no income tax each year while tens of millions of middle-class people have it withheld from every paycheck they receive. Those who use their income to buy groceries, school supplies, and pay for housing pay a much higher tax rate than those who have endlessly expansive resources.

Our current federal tax system is unfair, and we are encouraged by recent efforts to make sure those at the top and large corporations are paying their fair share, to invest in critical needs that will help families struggling, like housing, education, and child care.

Much of the income of the wealthy comes from gains in the value of stocks and other assets, and if assets are held onto, taxes are avoided. When the wealthy are required to pay taxes on the income from these assets, such as capital gains and dividends, they pay at tax rates that are far lower than the tax rates they would pay on wages and salaries.

The tax breaks and loopholes that make this tax avoidance possible have been expanded in recent years, including in the 2017 federal tax reform, increasing the already rampant disparities in incomes across race and class.

Montana’s state and local tax codes worsen the economic and racial inequities by asking taxpayers with lower and middle incomes to pay a larger share of their income in taxes than the wealthiest taxpayers.

We as a nation have a serious need to rebuild infrastructure and address glaring economic and racial inequities that have been named and grown during the COVID-19 pandemic. Luckily, fixing the flaws in the tax code that allow the wealthiest to avoid taxes would provide much-needed revenue to address our infrastructural needs and invest in our communities.

Federal lawmakers should make the following reforms to make sure the wealthy contribute to much-needed public investments. These reforms would only affect households with incomes in excess of $400,000.

  • Tax capital gains that have escaped taxation at the end of an individual’s lifetime.
  • Eliminate lower tax rates on capital gains and dividends for those with incomes over $1 million, taxing that income at the same tax rate as salaries and interest, and eliminating the deduction for pass-through income created in 2017. A new tax on the incomes of millionaires should also be strongly considered.
  • Bolster other taxes, such as the corporate income tax and the estate tax, which fall most heavily on the wealthiest households. Increase the corporate tax rate to 28 percent and make changes to the tax code to address the longstanding and rampant use of tax havens.

These proposals, together, represent a modest step in the direction of greater tax fairness.

The ARPA Commission needs to make housing an integral part of Montana’s post-pandemic recovery plan

Montana communities across the state are facing significant housing shortages, particularly for households living on lower and moderate incomes. The pandemic brought more attention to this ever-worsening crisis, as families struggle to find a safe, stable, and affordable place to live, employers struggle to hire and keep workers, and communities grapple with growing issues of homelessness. TOn Wednesday, July 21, the ARPA Economic Transformation and Stabilization and Workforce Development Advisory Commission will meet to discuss upcoming recommendations by the state administration on the use of flexible state COVID relief funds. The Montana Budget & Policy Center, together with 40 organizations, housing providers, and developers as part of the statewide Montana Housing Coalition, submitted a letter urging the state to invest a minimum of $40 million of flexible state fiscal relief funds into the construction and preservation of affordable housing.

Of this $40 million, we urge the Department of Commerce to dedicate at least $30 million in grants for direct financial assistance to fill funding gaps and reduce total development costs for housing projects. These grants will be similar to Community Development Block Grants (CDBG) and Housing Development Partnerships Program (HOME) administered by the Montana Housing Division. The Department can prioritize grants used to:

  • Purchase existing housing to convert to affordable housing; provide preconstruction technical assistance for affordable housing projects; and comprehensive rehabilitation and preservation of existing affordable housing;
  • Match federal, local, and other funding sources; and
  • Provide equity to housing projects that have applied for federal Low-Income Housing Tax Credits but not awarded due to lack of funds and located in communities disproportionately impacted by the pandemic.

Additionally, we urge the Department of Commerce to dedicate at least $10 million in grants to nonprofit housing partners and service organizations for housing and facilities necessary to provide safe shelters and supportive housing. The Department can prioritize grants used to:

  • Rent, acquire, and renovate existing facilities and convert underused hotels, motels, and other properties to shelters and supportive housing; and
  • Provide families at risk of or experiencing homelessness and for survivors of domestic violence.

Check out the full letter here. Montana’s State Fiscal Recovery Funds gives the Department of Commerce an unprecedented opportunity to tackle our state’s acute shortage of available and affordable housing and, by doing so, build stronger, resilient communities. We hope Montanans will make their voices heard and urge the ARPA Commission to make housing production an integral part of Montana’s post-pandemic recovery plan.

State must act immediately to prevent large SNAP cut from hurting Montanans

At the end of June, Governor Gianforte announced the termination of Montana’s state of emergency. This move effectively ends emergency Supplemental Nutrition Assistance Program (SNAP) benefits for over 46,000 Montana households. Unless the Governor and the Department of Public Health and Human Services takes immediate action, thousands of Montanans living on low-incomes are at risk of a substantial cut in their food assistance.

Emergency allotments have helped thousands during uncertain times.

Montana ranks above the national average in numbers of adults and children reporting food insecurity. The health and economic consequences of the COVID-19 pandemic have made affording food substantially more difficult for individuals living on low incomes. An estimated 84,000 adults in Montana report the household did not have enough food to eat in the last week. For families with children, the crisis is even greater – 30,000 adults living with children report the children in the household did not have enough food to eat.

Substantial increases in food prices have made it even more difficult for families and individuals living on low incomes to afford food. Food prices have climbed 5 percent since May 2020 and are expected to continue rising through 2021.

Emergency allotments (EAs) are a temporary increase in SNAP benefits to help households living on low incomes weather the COVID health crisis, a volatile job market, and an unequal economic recovery. This additional benefit raised each household’s SNAP benefits to the maximum benefit for their household size, supporting those hit hardest by the pandemic. For a state to receive emergency allotments, the state must either have a state of emergency in place, or an equivalent declaration approved by the USDA Food and Nutrition Service (FNS).

Montana households will lose nearly $100 a month in benefits. Some will lose even more.

Emergency allotments have been the largest source of pandemic related food assistance for people receiving SNAP benefits. With EAs, every household received at least $95 per month as of April 2021.

Some households will lose even more. For example, a senior who had been receiving the minimum SNAP benefit prior to the pandemic would now be receiving $234 with emergency allotments (as well as a 15 percent increase in SNAP benefits that USDA issued) each month. If emergency allotments end, they will find their benefits reduced to less than $20.

SNAP benefits have long been inadequate in addressing hunger. Even with the additional benefits the average per-person per-meal benefits is only $2.53. Without emergency allotments, families would be left with only $1.60 per person for each meal.

Emergency allotments strengthen Montana’s economy.

A loss in emergency allotments will create unnecessary hardship for over 46,000 households in Montana. This move will not only make it difficult for families to put food on the table, but will also endanger Montana’s post-pandemic economic recovery as the state loses $8 million a month in federally-funded assistance.

SNAP has long been one of the most effective ways to support the economy during financial crises, with every dollar spent in SNAP generating up to $1.50 in economic activity. Emergency allotments generate up to $12 million in economic activity every month, supporting local stores, businesses, and farmers across the state.

SNAP serves as a vital work support, with four out of five households having one or more individuals who worked within the last year. The majority of those who are not currently employed are children, elderly, or disabled. Nearly half of SNAP households in Montana (48 percent) have children, and 47 percent of households include one or more individuals living with a disability. Nearly one-third of SNAP households have an individual over age 60. These households, who were hard hit by the pandemic, rely on emergency allotments to meet their nutritional needs in the face of spreading COVID variants and rising food costs.

The state has options to preserve expanded SNAP benefits for struggling Montanans.

Several states that have ended their initial state emergency declaration, including Utah, Wisconsin, Oklahoma, Kansas, and Minnesota, are still issuing emergency allotments. FNS has signaled it is willing to work with states who have ended their emergency orders to ensure individuals are still receiving the boosted SNAP benefits. Even though Montana is no longer in its initial state of emergency, the state still has the ability to retain emergency allotments.

Last week, Montana Budget and Policy Center, the Montana Food Bank Network, and 27 other organizations around the state, including food pantries and faith groups, sent a letter to the Governor’s office and the Department of Health and Human Services asking the state to work with FNS preserve SNAP benefits for Montanans. As the state moves towards the next phase of pandemic recovery, it is essential to preserve help for those who are most in need of support.

Child Tax Credit Awareness Day

The child tax credit is a federal tax credit that provides relief for nearly all working people with children, lifting many families above the poverty line. For 2021, the child tax credit has been increased from $2,000 per child under 17 to $3,000 for each child between the ages of 6 and 17 and to $3,600 for each child under 6.  The credit has also been expanded to be fully refundable, meaning that children whose parents didn’t have enough earnings in a year to claim the full tax credit previously will receive the full credit in 2021. In Montana, 91 percent of children under 18 (209,000 children) will benefit. These changes are expected to reduce child poverty in Montana by 45 percent, by lifting family income above the poverty line.

Beginning July 15, the IRS will begin sending advanced monthly payments of the child tax credit. While payments will differ for different family situations, in general, for each qualifying child under 6, families will receive $300 monthly. For children ages 6 to 17, each family will receive a monthly payment of $250. The remaining half of the credit will be received when 2021 income tax returns are filed.

Am I eligible for the credit?

If you filed a 2019 or 2020 tax return and claimed the child tax credit on the return, live in the US for at least half the year, and have a qualifying child who is under 18 at the end of 2021 with a valid social security number, you are eligible for the credit.

The child tax credit expansion begins phasing out at incomes of $75,000 for single filers, $112,500 for single filers with dependents, and $150,000 for joint filers.

What should I do to receive advanced payments?

If you have filed your 2019 or 2020 taxes, you don’t need to do anything. If the IRS has your banking information on file, they will automatically deposit your monthly advance of the child tax credit. For filers without banking information on file with the IRS, the IRS will issue checks for advanced payments of the credit.

For families that do not file income taxes, the IRS has released a tool to submit your information to receive the automatic payments. Sign up now.

Can I decline the advanced payment?

For families that prefer to wait until they file their 2021 income taxes to receive the additional credit, the IRS plans to release a tool in the coming weeks to unenroll from payments.

How long will the credit expansion last?

The child tax credit expansion is currently only in effect for 2021.

End of Session Tax Bill Round-Up

Montana’s path to economic recovery and future prosperity is dependent upon the state budget, made up with tax revenues. While MBPC helped kill numerous tax cut bills that would have resulting in over $900 million in lost revenue each biennium, once fully phased in, the 2021 legislature passed tax cut bills that will cost over $100 million in lost revenue each biennium.

Individual Income Tax

The largest revenue losers were individual income tax cuts, packaged together as SB 399 and SB 159. SB 159 lowered the top income tax rate from 6.9 to 6.75 percent until tax year 2024. This tax cut primarily benefits the wealthiest, with over 80 percent of the tax cut going to the top 20 percent of Montanans.

SB 399, which goes into effect as SB 159 phases out, drops the top income tax rate even further to 6.5 percent. As a result of this bill, there are over 100,000 Montanans, spread across the income spectrum, who will see tax increases. This bill also opens Montana’s tax system up to additional volatility by increasing the number of provisions in the federal tax code that Montana’s tax system is tied to. In part to these volatility concerns, only 5 states remain that tie into the federal tax code in the same way as SB 399. This bill moves Montana in the wrong direction.

In addition, SB 399 eliminates 17 tax credits with little opportunity for the legislature to consider the merit of each credit. While tax simplification is a laudable goal, more forethought is needed for an efficient tax system.

Business Equipment Tax

Another costly bill was HB 303, which increased the property tax exemption for business equipment tax. Business equipment tax has been cut numerous times in Montana’s recent history.

As a result of these changes, the numbers of businesses paying business equipment tax have dropped from over 36,000 in 2000 to less than 9,000 before the passage of HB 303. Homeowners in Montana have seen their property tax obligation grow in relation to owners of business equipment in the last 20 years.

In the end, the 2021 legislature passed over 20 tax cut bills. Unfortunately, the vast majority of these bills preferentially benefit the wealthy, exacerbating income inequality in this state. Legislators have chosen to prioritize those who already have more than they need over those struggling to get by. Thankfully, Montana saw $100 million in tax cuts this session rather than $900 million. Going forward, MBPC will continue to educate legislators and the public about the effects of tax cuts already passed and any yet to be proposed.

MBPC’s Comment on the Proposed End to Pandemic Unemployment Insurance (UI)

On June 8, 2021, the Montana Budget & Policy Center submitted formal comment to the Montana Department of Labor & Industry, raising concerns with the proposed end to pandemic unemployment insurance (UI) benefits later this month. The Pandemic Emergency Unemployment Compensation, providing an additional $300 in benefits, and the Pandemic Unemployment Assistance program, for self-employed, underemployed, and independent contractors, have been critical programs as many families continue to face barriers to employment. According to the National Employment Law Project, approximately 25,000 Montanans could face the loss of benefits used to support their families. For more information, see our blog Ending Pandemic Unemployment Early Won’t Fix Barriers to Finding Work.

To read our submitted comments, download the PDF here.

Mothers need our continued support this Mother’s Day:

Every year, we take a moment to honor the support our mothers give to our families and communities. The task of raising children has never been easy, and for too long, parents have done so with not enough support.

But this past year has provided families with an entirely new set of challenges, and mothers have born a disproportionate part of the burdens caused by the COVID-19 pandemic.

While the job market is beginning to recover, women and especially mothers, were hit harder by the recession over the past year. School and childcare closures meant that many parents quit jobs that required them to work outside the home. Women lost more jobs than men, partially due to the fact they are overrepresented in the service sector which was particularly hard hit by business closures. Mothers lost proportionally more jobs than their counterparts without children.

But as pandemic eases and schools are reopening, more and more women are returning to the workforce. But while the situation may not be as desperate as it was six months ago, many of the challenges that women faced during, and even before the pandemic began, are still present.

So as we send mothers across the state a heart-felt “Thank you” this week, let’s pause and consider what mothers really need in order to take care of themselves and their families.

The Problem: A Lack of Affordable Child Care

A lack of affordable childcare has driven countless women out of the workforce for decades. With a shortage of safe and available options this year, women felt the lack of childcare more than ever.

A lack of safe, affordable childcare is a crisis in Montana. Across the state, 48 out of 56 counties fail to meet even 50 percent of demand with licensed childcare providers. The state ranks 40th for childcare availability nationwide. For more information, read our report: The Coronavirus and Child Care: Montana Must Do More for Workers and Families.

Next Steps: Adequately Fund Childcare and Early Education

The American Rescue Plan Act (ARPA) provides Montana with funds to help ease both the social and health effects of the pandemic.  House Bill 632, passed by the legislature, will provide $112.5 million for childcare stabilization and block grants. These funds will be provided to childcare desert for one-time equipment and necessary infrastructure, property improvements, worksite childcare, and employee training.

But Montana is still one of only a handful of states without any investment in early education. Montana lawmakers should pre-K programs in order to support parents and families.

The Problem: Paid Leave

The coronavirus pandemic highlighted the importance of access to paid leave when an employee was sick or needed to care for a loved one. But for years prior to the pandemic, women have been expected to return to work soon after giving birth or take unpaid leave to stay with their child. Likewise, if a family is met with an injury or illness, mothers have often had to choose between caring for themselves or a loved one and keeping their job.

Next Steps: The Family and Medical Leave Insurance Act

 Unfortunately, the legislature passed on an opportunity to support not only mothers, but all workers in Montana by failing to pass the Family and Medical Leave Insurance (FAMLI Act).  To read more about the how paid leave could benefit Montanans, read our post here: Time for Montana to Provide Paid Family and Medical Leave.

The Problem: Food Insecurity

School closures, rising food costs, and higher-than-normal rates of unemployment all contributed to rising rates of food insecurity over the past year. Feeding America projects that in 2021, 17 percent of children in Montana will experience food insecurity. While 2021 is likely to see lower rates of food insecurity than 2020 did, there are still far too many mothers in the state who do not know how they will feed children their next meal.

Next Steps: Protect Safety Net Programs

As long as both Montana and the federal government have emergency orders in place, Montanans who receive Supplemental Nutrition Assistance Program (SNAP) benefits are also receiving Emergency Allotments. The relief package last spring left out SNAP participants on the lowest incomes, however, these households and individuals will begin receiving $95 in emergency allotment benefits. Over six months, Montana will receive $15.9 million in SNAP benefits, unless the governor decides to end the emergency declaration prematurely.

Flowers and cards are nice ways to show our appreciation, but if we truly wish to support the mothers in our state, we should pay attention to what their needs are. Adequately funding childcare, providing access to paid leave, and ensuring food security are some of the most important ways we can show mothers we care.

House Bill 621 Would Bring Recreational Cannabis Tax Revenue to Indian Country

In November 2020, Montanans voted to pass I-190 to legalize possession and use of recreational cannabis and to establish a 20 percent tax on recreational cannabis sales. MBPC has chosen to use the race-neutral, scientific term “cannabis,” except when referencing state accounts.

What Is House Bill 621?

On Wednesday, March 24, House Tax is scheduled to hear House Bill (HB) 621. HB 621 would distribute 8.4 percent of recreational cannabis tax revenue to a newly created state-tribal marijuana revenue-sharing account for the Department of Revenue to provide tribal governments with grants for:

  • ensuring that cannabis is controlled based on state law;
  • addressing substance use;
  • fire and police protection;
  • emergency-related or disaster-related expenses; and
  • health services.

HB 621 would be a significant revenue boost for tribal governments. The fiscal note estimates that HB 621 would deposit roughly $382,000 into the account beginning in 2022, with that amount increasing annually to as much as $3.3 million in 2025. For comparison, the Department of Revenue’s latest biennial report notes that the 2020 tribal allocation was nearly $3.6 million for the cigarette tax.

Tribal Governments Need Revenue

Like all governments, tribal governments need revenue to fund programs and services on which Montanans rely. The power to generate revenue through taxation is inherent to tribal sovereignty. Yet, over time, state and local governments have hamstrung the ability of tribal governments to raise needed revenue by challenging tribal governments’ once-exclusive taxation authority. This means that tribal governments must provide many of the same services as other governments without the usual tax revenue on which those governments rely.

Tax revenue is an insignificant revenue source for tribal governments. While taxes represent the largest revenue source for the state and local governments in Montana, the largest source of tribal revenue comes from federal funding, most of which stems from the federal government’s trust responsibility to tribal nations. However, the federal government chronically fails to uphold this legally binding obligation. The Indian Health Service budget, for example, meets just more than half of American Indian health-care needs.

By competing with tribal nations for tax revenue, state and local governments worsen fiscal problems for tribal nations, extract wealth from tribal communities, and deny tribal governments the ability to adequately invest in their communities. (For more on taxation in Indian Country, see MBPC’s report, Policy Basics: Taxation Authority in Indian Country.)

House Bill 621 Would Help Pave a Path to Economic Recovery in Indian Country

HB 621 provides legislators with one tool to provide tribal nations with the fiscal relief they are overdue. The coronavirus pandemic has shone a brighter spotlight on deeply rooted inequities in Montana. Years of underinvestment, plus the outlined challenges to the ability of tribal governments to generate tax revenue, have resulted in outsized consequences of the pandemic for tribal communities. Recreational cannabis sales are estimated to bring millions of dollars of tax revenue into the state, meaning there is enough to share. The Legislature should vote yes on HB 621 to make this smart investment that helps pave the way to economic resilience and opportunity in Indian Country.

To make your voice heard through remote testimony, register through this link by noon on Tuesday, March 23.

Transmittal Update: State-Tribal Legislation

The Montana Legislature has reached transmittal, or the point in the legislative session at which general policy bills must move from one chamber to the other. That means that if a general policy bill started in the House, the Legislature must refer it to the Senate (and vice versa). If the Legislature fails to do so, that bill dies. This deadline does not apply to bills that appropriate money or deal with revenue.

This blog provides an update on some of the state-tribal bills that the Legislature has considered so far, not just those bills that are impacted by the transmittal deadline. The following bills are not a comprehensive run-through of all bills relevant to Indian Country.

Missing and Murdered Indigenous People (MMIP)

House Bill (HB) 35 would establish a missing persons review commission, which would review closed missing persons cases. The commission would 1) examine patterns and trends of MMIP cases, 2) educate stakeholders about MMIP and investigation and prevention strategies, and 3) make recommendations to curb MMIP rates. For the biennium, HB 35 would appropriate $85,000 from the general fund to the Department of Justice (DOJ) to operate the commission.

HB 36 would establish a grant program to help fund training opportunities for community-based missing persons response teams. For the biennium, HB 36 would transfer $61,000 from the general fund to the missing persons response team training grant account for the DOJ to administer.

The 2019 Legislature created the missing indigenous persons task force and the Looping in Native Communities (LINC) network grant program when it passed Senate Bill (SB) 312. The LINC grant program supports efforts of tribal nations to identify, report, and find missing indigenous persons. The task force administers the grant program. HB 98 would extend the termination dates of both the task force and the grant program from June 30, 2021, to June 30, 2023. HB 98 would also require the task force to identify causes of and make recommendations to reduce MMIP cases. The bill would also require the task force to produce a written report of its findings and recommendations. HB 98 would transfer $50,000 from the general fund to the LINC special revenue account for the biennium for the task force to provide matching grants to tribal agencies to implement LINC.

Senate Judiciary is scheduled to hear all three bills on March 10. MBPC supports all three bills.

Property Taxes

In 2011, the Legislature passed SB 412 to create a five-year tribal property tax exemption that tribal nations apply to fee land with a pending trust application. (For more on what this means, see MBPC’s report, Policy Basics: Land Status of Indian Country.) SB 138 would have repealed this exemption. As MBPC wrote about in early February, SB 138 has deep roots in settler colonialism. This bill is possible because of the forced allotment of reservations, which the federal government used in its efforts to dissolve tribal governments and reservations and assimilate American Indians into non-Indian society. One legacy of this policy is that it allows for state and local taxing jurisdictions to assess property taxes on tribally owned fee land. Senate Tax tabled SB 138 in committee.

SB 214 would revise the previously mentioned tribal property tax exemption to allow for counties to recapture “lost” tax revenue, should either the federal government deny a tribal nation’s fee-to-trust application or should the application remain pending after the five-year exemption expires. Senate Tax passed the bill on a 7-4 vote.

HB 526 would allow counties to challenge property tax exemptions that the Department of Revenue provides. The bill passed 3rd reading in the House on March 2 on a 66-33 vote. It now moves to the Senate for consideration.

MBPC opposes these bills.

Again, this blog does not capture the full breadth of bills that impact Indian Country. There are bills related to language preservation, voting rights, cannabis revenue, and more. MBPC will continue to track legislation and provide updates.

Present Law Budget: What does it mean and how does it affect our communities?

With the 2021 Montana legislative session less than a month away, decisions made by our state level policymakers will determine how Montanans weather this pandemic. The state budget is a big piece of that puzzle by providing funding for schools, health services, and maintenance of our roads and bridges.

Key budget terms that will be used a lot this session include present law budget, present law adjustments, and statewide present law costs. These are important actions the legislature will take to ensure the state can continue to provide critical services for our communities. Since it has been a while, we should brush up on these terms, so we can track and understand the decisions that will affect our friends, families, and communities.

Present law is the level of funding the state needs to maintain services, at the level and under the laws approved by the legislature in the last session. Present law, by itself, does not include any changes that may be a result of increased school enrollment, services caseloads, or inflation. Those are included in present law adjustments.

Present law adjustments are agency-specific budget adjustments (either up or down) needed to maintain services at the level approved by the legislature since the last budget. This could include changes in the number of people served by the Department of Corrections, the number of seniors or individuals with disabilities accessing nursing home or community services, or inflationary adjustments to provide the same level of services for the next two years. An example of a present law adjustment in the most recent budget is an increase in federal funds for the Department of Public Health & Human to continue to provide existing services for their food and energy assistance programs, given the rise in food insecurity and demand for energy assistance during the coronavirus pandemic. The budget also provides an inflationary and enrollment adjustments to support Montana’s public schools.

Statewide present law costs are costs that are adjusted for all agencies using the same methodology. Increases in the cost of personnel benefits or increases in insurance costs are examples of statewide present law costs. Present law adjustments are different from statewide present law because they are agency specific, and are not applied to all agencies, due to varying agency responsibilities.

While these adjustments to the budget may be construed as “growth,” they are really adjustments to ensure the state can continue to provide critical services at the current level. These are services allowing seniors and people with disabilities to stay in their home and live with dignity, ensuring our children are getting the education they need to succeed, and maintaining health care coverage for nearly one in four Montanans through Medicaid and CHIP.  As we head into another legislative session, we hope policymakers will keep in mind how important these adjustments are to their communities and constituents.