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Taxes are Too High

Gianforte’s current tax cut proposals could affect ongoing public services

By Mike Jopek

In his first half as governor Steve Bullock proposed to the Montana Legislature a $100 million homeowner property tax cut. Bullock’s proposal was modeled after his predecessor, who signed a law allocating $400 back to every in-state Montana homeowner.

The Republican-controlled Legislature said no to Bullock’s reallocations of taxpayer funds. Republicans and Bullock did agree to permanently lower the business equipment tax to 1.5 percent and increased the valuation exempt from taxation to $100,000.

Bullock and the Republican-controlled Legislature cut the business equipment tax rate by a third and increased the exemption threshold five-fold. It’s a big deal to many property taxpayers. It could have also become a significant hit to city, county and school funding, which rely on property taxes to balance budgets.

Locally these funds pay for schoolteachers, parks personnel, road workers, librarians, firefighters, and police. If the state cuts property taxes and doesn’t locally backfill the funds, it means fewer firefighters and librarians or more local property taxes. Most property taxpayers remain homeowners.

The Legislature and governor did backfill millions of dollars to local jurisdictions for state-enacted tax cuts. More state funds to public education and teachers means less local tax funds.

The business equipment tax cut is different from a homeowner property tax rebate. It’s an ongoing versus one-time cut. In 2007, some 250,000 people living in their homes received a $400 one-time rebate from Montana.

When Gov. Marc Racicot left office, Montana enjoyed a $22 million budget surplus. As Judy Martz retired from service, Montana had a $163 million budget surplus. After eight years as governor, Brian Schweitzer left Montana with more that $400 million surplus.

Bullock says the state should hold a $300 million ending fund balance. To their credit, Bullock and past Legislatures have been able to more that achieve this goal.

Many people will agree that taxes are too high. Republican gubernatorial candidate Greg Gianforte has proposed to cut the top income tax rate by 15 percent from 6.9 percent to 6 percent while eliminating the business equipment property taxes entirely.

Eliminating the business equipment tax is an $81 million ongoing and local property tax cut to people who currently own equipment valued over $100,000. Cutting the top bracket income tax rate by 15 percent is a $125 million ongoing revenue loss to the state.

Neither of these tax cut proposals do much for farmers like me or most homeowners. Many Montana taxpayers don’t earn enough to occupy the top income bracket and even less own over $100,000 worth of business equipment.

Much of Montana’s rainy day fund is one-time money that’s neither ongoing nor guaranteed budget surpluses.

Gianforte’s current tax cut proposals could affect ongoing public services. As more policy details emerge, hopefully the only way to reduce $200 million of ongoing revenue from Montana won’t involve cutting statewide services.

Montana’s Constitution requires a balanced budget. Any legislative question quickly resorts to which state programs warrant cuts. Only real choices are education, incarceration, or health care.

Many public services are hardly worthy of only one-time money. Yet that’s all likely left at the end of the next legislative session after all the permanent tax breaks are peeled away from the Legislature’s own revenue estimates.

Montana has wisely maintained significant budget surpluses to deal with one-time emergencies like wildfires, catastrophes or economic hardships. Past governors have been prudent with our tax dollars; when there’s extra, some was given back, some invested in our future, and some saved for a rainy day.

If anyone deserves tax cuts next legislative session it would be homeowners. Yet our propensity for simplicity and political demagoguery remains an obstacle. Maybe the next Legislature finds agreement to cap property taxes for people living in their homes.