Gianforte-backed tax bills set for first hearing in Montana Legislature
HELENA — Gov. Greg Gianforte has made tax breaks a key part of his budget, with proposals for $1 billion in property and income tax cuts. Now, some of the key ideas in that plan are being finalized for their first hearings in the Montana Legislature.
Earlier this month, Gianforte held a press conference urging lawmakers to act quickly on tax break proposals.
“Ultimately, this isn’t government money, it’s the money of hard-working Montanans who earn it,” he said. “We are committed to putting money back into the pockets of Montanans through permanent, long-term tax breaks and rebates.”
Three of the governor’s priorities will have committee hearings on Tuesday. The Senate Tax Committee will hear testimony on Senate Bill 121, sponsored by Senator Becky Beard, R-Elliston. There would be two major changes: lowering the top tax rate from 6.5% to 5.9% from 2024; and more than triple the state income tax credit for low-income families.
During the 2021 legislature, lawmakers passed a bill that will reduce the number of state income tax brackets from seven to two starting in 2024. The two tax rates were set at 4.7% and 6.5%.
According to an analysis by the governor’s Office of Budget and Programming, a cut in the top tax rate — which leaders say most Montanans pay — would increase state income tax revenues by $127.8 million in the first year and by $150.6 million through 2027 -Reduce dollars per year.
The state payroll tax credit is based on a federal program for low- and middle-income families. Currently, Montana allows individuals who are eligible for the federal loan to claim 3% of that amount from the state. SB 121 would increase that to 10%. The governor’s budget office estimated that the change would increase requested credits from $4.7 million per year to $15.8 million per year.
“Montaners are struggling to make ends meet and have paid more in income taxes than the state needs to fund essential services,” Beard said Monday in a statement from Senate Republican leadership. “This is a sensible conservative approach that will give Montanans a raise by permanently cutting the taxes they pay.”
The House Tax Committee will hold hearings on two more proposals on Tuesday. House Bill 222, sponsored by Rep. Tom Welch, R-Dillon, would provide a property tax reduction of up to $1,000 over the next two years for a Montana real estate owner’s primary residence within the state. Gianforte said that would set taxpayers back about $500 million.
House Bill 212 by Rep. Josh Kassmier, R-Fort Benton, would significantly increase Montana’s business equipment tax exemption. Currently, businesses are required to pay a tax on a variety of equipment, from farm equipment to mining and oil and gas equipment to commercial furniture and fixtures. Smaller businesses are exempt if their total equipment is less than $300,000. HB 212 would raise that limit to $1 million.
Lawmakers already increased the exemption from $100,000 to $300,000 in the 2021 session, and Gianforte said those increases would stop more than 5,000 businesses, farms and ranches from paying taxes on business equipment.
Gianforte has also proposed other tax changes, including a child tax credit and an adoption credit. However, his proposals are not the only ideas for tax cuts.
Last week, the House Appropriations Committee held a hearing on House Bill 192 from Rep. Bill Mercer, R-Billings. It would set aside $250 million for property tax returns — a single $1,000 payment compared to HB 222’s two payments — but an additional $650 million for individual income tax returns. Individuals would get up to $1,250, and married couples would get up to $2,500.
Mercer told MTN it makes sense to use some of the surplus to pay back individual income taxpayers because that’s where most of the surplus comes from. He said using $900 million for rebates would still leave well over $1 billion for lawmakers to use for other purposes. He said because his bill used only one-time funds, he didn’t think it would hurt a long-term cut in the income tax rate.
In addition, Senate GOP leaders are highlighting another bill by Sen. Greg Hertz, R-Polson, that would simplify the state’s corporate tax calculations to use a single factor based on sales.
As more tax proposals come, it’s clear how much government revenue to return to taxpayers – and how to do that – will be a major debate by the end of the session.