Bills to cut, simplify state income taxes have first hearing in Montana Senate

Bills to cut, simplify state income taxes have first hearing in Montana Senate, Missoulian (also Helena Independent Record), January 29, 2015

 

HELENA – Republican lawmakers added two more bills to their tax-cutting mix Thursday: One that chops state income tax rates and another that overhauls and simplifies the income tax, with fewer brackets and lower rates.

“It takes Montana’s income tax from one of the most complicated ones to one of the most simple,” Sen. Bruce Tutvedt, R-Kalispell, said of his Senate Bill 171. “It’s able to lower rates and simplify the system in a very good and exciting way.”

Tutvedt’s bill, presented Thursday to the Senate Taxation Committee, wouldn’t lower overall taxes much over the long run – although it would increase and decrease taxes for certain taxpayers.

The second bill heard Thursday by the same committee, however, is a straight, permanent income tax cut of $70 million to $75 million a year, cutting the rate for each of Montana’s six income tax brackets.

Sen. Duane Ankney, R-Colstrip, the sponsor of Senate Bill 200, said he intended the bill to give broader cuts to middle-class taxpayers – although he acknowledged that it benefits big earners, too.

“(The blue-collar guy) has things he wants to do with that money that he pays now in taxes,” Ankney said. “This tax cut ain’t aimed at the rich and famous. …

“Yeah, there is more money going out of this to those in that top-earning bracket. But that’s the people who’s hiring this guy who’s going to work, and I’m trying to cut the guy who’s going to work’s taxes.”

Ankney also said he’s open to negotiating his bill’s proposed rate cut, saying he had intended the overall cut to be about $50 million a year instead of $75 million.

“If there is a number somewhere that can be reached, a reasonable number, I’m certainly open to that, he said.

The Taxation Committee took no action on the bills, which are among a half-dozen tax cuts or revisions proposed this Legislature by Republicans.

Earlier this week, the Montana House endorsed a pair of bills that would cut state income taxes by a combined $120 million over two years.

The GOP’s tax-cut bills may be on a crash course with Democratic Gov. Steve Bullock, who has said he wants to maintain a $300 million cushion in the state budget the next two years, and will veto bills that threaten that ending-fund balance.

In fact, at Thursday’s hearing on SB200, state Deputy Revenue Director Gene Walborn testified against it, saying “it just costs too much.”

SB200 would cut Montana’s income tax rates in all six brackets, giving proportionately larger cuts to the lower and middle-income brackets.

Joe Balyeat of Americans for Prosperity-Montana, a free-market group, said liberals should support the measure because it gives those bigger cuts to the low-income brackets and will spur economic growth and wage growth.

Yet Heather O’Loughlin, co-director of the Montana Budget & Policy Center, which advocates for low- and middle-income people, said the benefits of the cut flow disproportionately to the richest taxpayers.

The top 1 percent of taxpayers would get an average tax break of $1,100 a year, while someone making $27,000 would get a cut of about $28, she said.

Tutvedt said his bill is meant to simplify the system by reducing the number of brackets from six to two, cutting rates for those brackets, and eliminating many tax deductions and credits.

State revenue staffers said the biggest losers under Tutvedt’s bill would be married couples who file their state income taxes separately. They likely would have to file jointly under Tutvedt’s changes, forcing some of them to pay an overall higher rate, the agency said.

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