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Montana Viewpoint
A TAX BREAK FOR THE FORGOTTEN MAJORITY OF MONTANANS

April 11, 2005

This week the House Taxation Committee will hear my bill to provide a straight $155 property tax credit for every Montana household. I seldom talk about my legislation in my column, but I believe this bill is important to Montanans.

Senate Bill 520 changes Montana’s income tax code to make it more equitable and creates a “refundable income tax credit” of $155 for every Montana homeowner and renter in 2005. In 2006 and thereafter, the credit will be $135. The tax credit can be used to offset your Montana income tax. If the credit is more than the tax you owe, you will get a refund for the difference. If you don’t have to file income tax, then you can still get the credit by filing a form with the Montana Department of Revenue, which will send you a check.

The credit is higher in 2005 than 2006 because there is more money available to rebate for 2005. For those who wonder why renters should get a property tax rebate, the answer economists give is that property tax and other expenses such as depreciation (and sometimes utilities) are included in the rent charged.

This issue is important because none of the tax cuts given over the past ten years have gone to middle class Montanans, the people I call the “Forgotten Majority.” Quite the opposite; the tax cuts that have been given to industry have had the effect of driving up school property taxes across the board, hitting those who can least afford it the hardest.

SB 520 takes a 2003 income tax cut that disproportionately benefited people with the highest incomes and distributes it evenly to everyone.

The 2003 legislation, SB 407, was a highly partisan, hotly contested piece of legislation that was purportedly designed to lower Montana’s top income tax rate of 11% and offer a capital gains tax cut. However, it also cut income taxes by some $50 million a year, but raised cigarette and lodging taxes to make up the difference.

The income tax cut in 2003 was anything but evenly distributed. For instance, 41% of the tax cut went to people with annual incomes of over $200,000. SB 520 will take that money and distribute it evenly across all income levels. I think that’s the only fair way to do it. In contrast to the 2003 law, SB 520 will lower taxes for 96% of Montana households in 2005 and for 93% in 2006.

SB 520 leaves the stated goals of the 2003 legislation intact; it provides a top income tax rate of 7.8% which is well below the old rate of 11%, and has a capital gains credit of 1%.

The philosophy behind the 2003 law is that of trickle down economics; tax cuts for those in the upper income bracket will result in investment and job growth. They may well result in investment, but it will be in Wall Street, not Main Street. The tax cuts in SB 520 will largely be spent locally—Main Street, not Wall Street.

This issue is just as hotly contested as was the 2003 legislation, but I can’t understand what’s so controversial about treating everyone the same. It seems to me that giving everyone an equal share of a tax cut is the only fair way to do it. If that makes sense to you, let your legislator know.

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620

jim@jimelliott.org