Tax-Exempt Bill for Seniors Faces Scrutiny

Daily Interlake – January 25, 2017

A bill that would make Montanans’ social security benefits exempt from income taxes met scrutiny due to its annual $75 million price tag during a Senate hearing in the capital on Tuesday morning. 

Dee Brown, R-Hungry Horse, told the Senate Taxation Committee she didn’t think it was right for Montana seniors to have taxes chip away at their social security income.

The bill’s primary sponsor, Brown said Montana is one of 13 states “still taxing their gray-haired populations for benefits earned through years of work.”

If passed, the bill would make all social security benefits tax exempt, beginning this year.

No one spoke in favor of Senate Bill 76, but there was a short line of people waiting to speak in opposition to the bill.

Mike Kadas, director of the Department of Revenue, said the state would lose $75 million in revenue a year if it passed.

“I don’t believe this is the moment we could really legitimately consider that big of an impact,” Kadas said.

He said under the state’s current law, Montana follows the federal formula to determine the portions of social security benefits that are taxable or tax exempt based on a person’s income. He said those exceptions vary, from 100 percent to 15 percent, based on the family. 

“We all benefit from the services the state provides, how do we divvy up the responsibility for paying for that?” he asked the senate during the hearing. “… At least part of that system should be based on one’s ability to pay.”

Heather O’Loughlin with the Montana Budget and Policy Center said the loss of revenue would be too hard a hit for Montana this year as the state faces budgetary shortfalls that legislators are trying to fill by making cuts across the board.

Bob Story, the president of the Montana Taxpayers Association, said he could see expanding exemptions to seniors struggling to pay bills, but not every person receiving social security benefits.

“I think the sponsor is attempting to do a good thing with this bill, but like all blanket (issues) you pick up people who probably don’t need it,” Story said.

Brown said her “eyes kind of bugged out” when she saw the large fiscal note attached to her proposed bill. 

She also said she understood the bill opponents’ perspective that not all seniors financially need tax exemptions.

But Brown said she proposed the bill with her 90-year-old math teacher in mind, who she said receives $200 a month in social security benefits and still feels the weight of taxes.

“Perhaps this isn’t the session for this bill, but it’s the session that we need to start the conversation,” Brown said.

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