This week, the final Senate votes were passed for a set of bills that allocate a billion-dollar portion of Montana’s surplus, which is over $2.5 billion, towards tax rebates and other spending initiatives. These bills are now awaiting approval from Gov. Greg Gianforte.
Should Gianforte sign the bills, which is probable, it would set the stage for the state to provide income tax rebates reaching a maximum of $1,250 per taxpayer, along with property tax rebates of up to $1,000 per homeowner. When combined, these rebate initiatives would result in an estimated withdrawal of $764 million from the state’s funds.
Lawmakers have nicknamed it “the six-pack,” but the six-bill package consists of various measures. One bill aims to reduce state debt, while another intends to alleviate the burden of business equipment taxes for certain business owners. Additionally, there are plans to lower capital gains tax rates and allocate $100 million towards a highway construction fund.
Two other tax cut bills identified as priorities by Republicans also passed final votes in the House this week, including a signature measure that would cut the state’s top bracket income tax rate and expand Montana’s version of the federal Earned Income Tax Credit. The income tax cut bill would reduce state revenues by roughly $160 million a year on an ongoing basis.
Republican leaders argue that the rebates aim to reimburse taxpayers who have contributed more than required to fund state government operations during the previous two-year budget period. Additionally, they claim that the rebates will assist Montanans in managing the financial strain caused by increasing inflation on family budgets.
“We said coming into the legislative session that providing financial relief to Montanans suffering from inflation and the high cost of living was our No. 1 priority,” Senate President Jason Ellsworth, R-Hamilton, said in a statement. “Before we’ve even hit the halfway point of the legislative session, we’re delivering on that commitment with the largest tax cut in Montana history.”
“We are incredibly proud to fulfill this promise and return Montanans their hard-earned money,” said Speaker of the House Matt Regier, R-Kalispell.
The Democrats belonging to the minority party have consistently opposed the rebate and tax cut bills. They argue that these bills allow for excessive spending too soon in the session, without considering the availability of spring revenue estimates or determining the required funding for other critical areas like mental health care programs, nursing homes, and the state prison system.
“A lot of these proposals are tax cuts for very wealthy folks, when we know that we have a housing crisis, businesses are begging us to do something about childcare, and folks who are on fixed incomes are begging us to do something about property taxes,” House Minority Leader Kim Abbott, D-Helena, said at a press briefing last week.
“We’re I think being irresponsible by ripping through, for example, the six-pack of bills as quickly as we are,” said Senate Minority Leader Pat Flowers, D-Belgrade. “Not to make light of it, but I’m worried about the hangover.”
Democrats in both the House and Senate engaged in debates regarding the bill, which aimed to authorize property tax rebates. Their efforts to introduce amendments that would extend property tax rebates to renters as well as homeowners, unfortunately, did not yield successful outcomes.
There are eight significant tax and spending bills currently on their way to the governor.
- House Bill 222 would put $284 million toward property tax rebate checks of as much as $1,000 for Montana homeowners — $500 for taxes paid in each of 2022 and 2023. The Montana Department of Revenue estimates about 312,000 households would be eligible.
- House Bill 192 would spend $480 million on income tax rebates of up to $1,250 per taxpayer, or $2,500 for spouses who file taxes jointly. The revenue department estimates the rebates would be available to an estimated 460,000 taxpayers who were full-time Montana residents in 2020 and 2021.
- House Bill 251 would allocate $125 million to paying down some state debt, saving the state money on future interest payments.
- House Bill 267 would put $100 million into a highway fund to let the state access matching federal funding.
- House Bill 212 raises the exemption threshold for the state’s business equipment tax from $300,000 to $1 million. The revenue department estimates the tax cut would cost the state about $9 million a year. The bill would also backfill local government revenues reduced by the cut.
- House Bill 221 streamlines the state’s capital gains tax code and cuts its effective rates. The revenue department estimates the bill would reduce state revenues by about $16 million a year.
- Senate Bill 121 would reduce the state’s top-bracket income tax rate from 6.5% to 5.9%, at an estimated cost of $150 million a year. It would also expand the state’s version of the federal Earned Income Tax Credit, directing about $11 million more annually toward lower-income working families.
- Senate Bill 124, which would adjust the state’s corporate income tax code to generally shift tax burden from companies with extensive in-state facilities and payroll onto e-commerce companies such as Amazon that sell into Montana with a comparatively light physical footprint. The revenue department estimates the bill would on net increase state revenues by about $16 million a year.
