HELENA – A Republican legislative leader says an income tax cut needs to be part of negotiations on the state budget.
Senate Majority Leader Art Wittich told the tax committee Wednesday that his proposal would cut the state’s top tax rate from 6.9 percent to 5.9 percent. It would cost state coffers about $120 million a year.
The Bozeman Republican said the benefit would be widespread since most Montana tax filers pay the state’s top tax rate on taxable income over $10,800. He argued lawmakers should be less worried about the lost revenue, and suggested the money could be taken out of planned spending increases in the governor’s budget.
“I think the members of this committee have to ask themselves, ‘Whose money is it?'” Wittich said. “If people have more of their own money in their pocket, they can invest it the way they want to invest it.”
Opponents argued the benefit would disproportionately benefit the wealthiest earners and could harm the state’s ongoing ability to pay for needed infrastructure, like schools. Tara Veazey, executive director of Montana Budget and Policy Center, said tax cuts for the wealthiest earners don’t necessarily result in an increase of economic activity.
“Businesses and people invest where the infrastructure is strong and there is a high degree of confidence that it will be maintained,” she said.
Gov. Steve Bullock has proposed a $400-per-homeowner tax rebate as part of his budget that also cuts the business equipment tax.
Wittich said Republicans expect an income tax cut will be among the items they will seek to make part of any final budget negotiations with Bullock later this session.
The House on Wednesday rejected, with a 57-43 bipartisan vote, a plan to attack the tax cuts from the other side of the scale. The proposal would have exempted the first $2,700 of taxable income from the 1 percent tax levied at that threshold and cost the state about $13 million a year.