HELENA — Democratic lawmakers pressed again Thursday to raise taxes on the wealthiest Montanans to boost revenue and ease proposed cuts to fix a state budget shortfall, even though Republicans have twice tabled similar proposals this session.
The bill heard in the Senate Taxation Committee is sponsored by Sen. Edie McClafferty, D-Butte. It reflects the plan in Democratic Gov. Steve Bullock’s budget proposal to create a new 7.9 percent income tax bracket for people who earn more than $500,000 a year.
Those top earners now pay a 6.9 percent tax rate, which is the same as a person earning $17,500 a year.
The tax hike would generate between $16 million and $20 million in additional revenue a year. McClafferty said that money could be used to fight poverty, fix schools and prevent proposed cuts to health and social services programs.
“We need to do what we can to fix that and make things right,” McClafferty said. “The people of Montana are looking at us to come out of here with a good, solid budget that doesn’t hurt everybody.”
A separate bill being considered in the House mirrors another Bullock proposal that would have the wealthy pay a larger share of taxes. The bill sponsored by Jim Hamilton, D-Bozeman, would eliminate a 2 percent tax credit for people who report capital gains or income higher than $1 million.
Republican majority lawmakers in the House previously tabled two proposed tax hikes on the wealthy. One, by Rep. Kim Abbott, D-Helena, would have taxed people earning more than $400,000 a year at 8.9 percent. The other, by Rep. Tom Woods, D-Missoula, would have taxed people earning between $300,000 and $500,000 at 7.4 percent, and those earning over $500,000 at 7.9 percent.
Republican lawmakers plan to balance the 2018-2019 state budget by cutting programs and keeping vacancies open across most state agencies, and say the answer to a revenue downturn isn’t new taxes.
The Senate committee didn’t take immediate action on McClafferty’s proposal, but Republicans on the committee expressed some of the same reservations that their counterparts in the House did.
Sen. Brian Hoven, R-Great Falls, said he was concerned about the tax hike hurting people who aren’t rich but decide to sell property or businesses they spent their whole lives building.
“We’re talking here like that’s a fixed group of people, the wealthy,” he said. “There’s a lot of turnover in that group.”
Department of Revenue Director Mike Kadas said the turnover isn’t large. His agency tracked 117 people who reported more than $1 million in capital gains in 2010. Five years later, 95 of them were still reporting that amount, and 11 had died, he said.
Kadas added that raising or lower income taxes does not result in a significant change in the state’s economic performance, and other factors are more important to people considering moving to Montana, such as quality of life and the educational system.
The wealthiest earners have fared the best under Montana’s current tax system, he said.
“The way the economy is set up right now, it’s for these people,” Kadas said.