Earned Income Tax Credit Passes First Vote in Montana House

Bozeman Chronicle – March 16, 2017

A proposal to help working-class Montanans get more of their salaries back from the taxman has easily passed the state House of Representatives.

Democratic Rep. Tom Jacobson of Great Falls presented his House Bill 391 during the House floor session on Wednesday. It passed on a 68-32 vote. It was supported by all 41 Democrats in the House and 27 Republicans.

It would create a state earned income tax credit equal to 3 percent of the current federal earned income tax credit, which was created in 1975. Jacobson originally proposed a 10 percent credit, but the amount was amended down in consideration of budget constraints.

Jacobson told the Chronicle that’s OK. “This gets our feet on the ground. We can work on the percentage in future years,” he said.

At 3 percent, Montana’s credit would be the lowest of the 26 states that have an earned income tax credit, according to the National Conference of State Legislatures.

An estimated 80,000 Montanans who make less than $50,000 per year would be eligible to receive the credit in 2020. The amount of credit varies depending on marital status and the number of dependent children. Based on 2015 tax returns, the average credit would be about $63.

Jacobson said working-class families could use the money to “pay down bills, put food on the table and buy school clothes. 

The Legislature’s fiscal analysts predict the bill would see the Montana Department of Revenue send $4.8 million back to Montanans.

Supporters of the bill who appeared at a committee hearing included representatives of the Montana Budget & Policy Center, Montana Credit Union Network, Montana Association of Christians, AARP of Montana, Montana Women Vote, Montana Coalition Against Domestic and Sexual Violence, Rural Dynamics, United Way and the Montana Human Rights Network.

“We are one of only a few states that taxes families living in poverty. This is a very targeted way to help those who are working and living in poverty while paying state income taxes,” said Heather O’Loughlin of the Montana Budget & Policy Center who spoke in support of the bill in committee.

No one opposed it. It was referred to the House Appropriations Committee but not yet scheduled for hearing. The bill will need an affirmative vote there and again on the floor before moving to the Senate.

A similar bill is also moving in the state Senate at Gov. Steve Bullock’s behest. It has passed its first committee and is awaiting a vote by the full Senate.

This is Jacobson’s second attempt at creating the tax credit. His 2015 proposal for a similar 10 percent tax credit was tabled and died in committee.

“It’s like any bill,” he said. “You’ve got to bring it several times.”

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