Great Falls Tribune – March 23, 2017
A state panel heard a proposal Wednesday to increase the state’s capital gains tax credit for people who make more than $1 million, which is expected to affect about 400 people and raise about $21 million in revenue for the state.
House Bill 598, sponsored by Rep. Jim Hamilton, D-Bozeman, would raise the rate from 4.9 percent set in 2003 to 6.9 percent as paid by others, he told members of the House Taxation Committee. No action was taken at Wednesday’s meeting.
Hamilton said for most lawmakers it would impact three to four people in their district, adding that in some districts it would affect none.
“It’s a very small group,” he said.
Department of Revenue Director Michael Kadas said a House bill in 2003 to reduce the capital gains tax credit from 6.9 percent to 4.9 percent was to take the burden off some of the people with capital gains taxes in the belief they would invest in Montana.
He said that didn’t happen.
Kadas said it was appropriate to take some of the “gift” of 2003 “and use it to fund budgets going forward.”
He said capital gains was not necessarily a one-time thing.
Kadas said taxpayers who had more than $1 million in capital gains in 2010 in general had higher gains and higher incomes than in following years. Also, most had capital gains in each of the following years.
Kadas presented lawmakers with graphs that showed of the 117 with more than $1 million in capital gains in 2010, 11 had died, two were longtime residents who stopped filing and two are chronic late filers who stopped filing.
George Olsen of the Montana Society of CPA objected to the bill, saying it would send the wrong message if the state is trying to attract new businesses and jobs.
Bob Story of the Montana Taxpayers Association said it was time the Legislature decided if to continue with a good policy or decide if there was no benefit to have a benefit on capital gains.
Also objecting was Bridger Mahlum of the Montana Chamber of Commerce who said the tax does not fit into the state’s business climate.
“We need to encourage smart money and asset management in Montana,” he said.
Eric Feaver of the MEA-MFT, the state’s largest public employees union, supported the bill saying “We need the money.”
He said he was in the legislative galley in 2003 when lawmakers passed what he said was called “a black hole bill.”
“This is a good bill,” he said about HB 4078. “It provides justice in the tax code.”
Heather O’Loughlin of the Montana Budget and Policy Center, also supported the proposal, saying it was a “common sense way to limit the tax break to those below $1 million.”
She said Montana was in the minority of states that provide preferential tax treatment for capital gains.