Monday, June 20, 2011
By Molly Severtson
Now that the dust has settled from the 2011 Montana Legislature, it is appropriate to look beneath the surface of the session – beyond the headline-grabbing bills: the spear-hunting bill, the nullification bills and the bill that would have ended the Endangered Species Act in Montana – to look at a couple of bills that were really good ideas, but were given little consideration during the session.
One of these bills was Senate Bill 398, introduced by Sen. Christine Kaufmann of Helena, which would have increased the progressivity of Montana’s income tax system by adding a high-income tax bracket to the tax code. As it stands, Montana’s income tax rates are almost flat, with a tiny bit of progressivity at the bottom end, meaning that a family with a taxable income of $14,000 a year pays the same tax rate (6.9%) as a family with a taxable income of $4 million a year. Montana is also one of the only states in the nation which taxes families living in poverty (6% for those with a taxable income of $3,000 a year).
Sen. Kaufmann’s bill would have increased the tax rate on taxable income of $250,000 a year and more to 11%. This change in the tax code would have brought in more than $80 million a year starting in fiscal year 2013.
The idea that progressivity – or ability to pay – is inherently the fairest type of tax system is an idea that goes back millennia, including the Biblical story of the widow’s mite. The idea behind supporting a progressive system is this: For a family making $20,000 a year, it is much harder to give up say 5% of their income – or $1,000 – than it is for a family making $300,000 a year to give up the same percentage of their income because their basic needs – and then some – are already being met. Therefore, it is fair to tax people at an increasing percentage in accordance with their income. The impact of each of the different tax rates on those families will be felt in much the same way, making the system fair.
It is also true that high-income people benefit at a higher level from the social infrastructure supported by a stable tax system, including public safety and public roads. If you own a profitable business on a busy street, you benefit at a higher level from people being able to access your business than someone who simply uses the same road to drive to a modest-paying job. It is to your great benefit that the road be maintained, and so it follows that you should contribute a higher percentage of your income to support it.
These are important issues that should be debated by our representatives in the legislature. But while the spear-hunting bill was passing out of the Fish and Game Committee 7-3 and passing 2nd and 3rd readings in the Senate, passage of SB 398 was never even voted on in the Senate Taxation Committee, let alone debated on the Senate or House Floors.
Another bill worthy of careful consideration was Sen. Mary Caferro’s Senate Bill 360, a bill that would have enacted a refundable, state-level earned income tax credit – or EITC – in Montana. Republican hero President Ronald Reagan is often quoted as touting the federal EITC as, “the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress.”
As structured in SB 360, a state EITC in Montana would have cost the state about $33 million per year, less than half of what SB 398 would have brought in. In addition, studies have shown that low-income families typically put their EITC right back into the local economy, paying a month’s rent, buying groceries or making a needed car repair.
Initiatives to enact EITCs have often been met with bi-partisan support in other states, and in the 2009 Montana Legislature, an EITC bill passed out of the House of Representatives with Republican support, but in this session, just like SB 398, SB 360 got very little consideration in the Senate Taxation Committee. The bill was tabled on March 12 and died in committee.
Undoubtedly, the topic of tax fairness is complex and should be vigorously debated. Several important principals are related to tax fairness, including the equity of a tax system (whether or not it treats those at the same income levels and different income levels fairly), the simplicity of a tax system (whether or not it allows excessive loopholes and is understandable) and a tax system’s exportability (the extent to which the system taxes out-of-state individuals and businesses which benefit from the state’s infrastructure).
The knee-jerk reaction of many legislators, especially those on the far-right end of the political spectrum, is a continual cry for lower taxes in the name of economic development despite the fact that reliable studies have consistently shown that state tax rates have little effect on business decisions. However, the quality of a state’s infrastructure has been shown to have a large effect on such decisions, and the state’s infrastructure – its roads, its public safety, its educated workforce – are all supported by a strong, stable tax system.
Overall, this legislative session was mostly one of defense for progressive taxation advocates, and the hard work of many people prevented many bad bills from passing. But the time taken to debate the legitimacy of bills Gov. Schweitzer called “frivolous,” “silly,” and “just bad ideas,” took time from serious bills that deserved serious debate and serious consideration including Senate Bills 398 and 360.
Monday, June 6, 2011
The Policy Institute will present the Leadership Seminar Series in Indian Country, June 30 and July 1, 2011, at Hearth View Center in Arlee, Montana.
The event, designed specifically for Native American participants, will feature presentations and discussions led by prominent Indian leaders such as Montana Superintendent of Public Instruction Denise Juneau, and will cover topics like Indian voting history and current trends, and bridging the urban/rural divide of Native Americans in Montana.
The event will be presented at no cost to participants and will include one night’s stay (Thursday, June 30) at the Heart View Center in Arlee, dinner on Thursday (June 30) evening and breakfast on Friday (July 1) morning.
If you are interested in attending, please feel free to contact Molly Severtson for more information.
Friday, June 3, 2011
By Molly Severtson
Executive Director, The Policy Institute
The 2011 Montana Legislature adjourned more than one month ago, but the memory of the rocky road that was the 62nd session is still fresh in many minds. Those on the progressive end of the political spectrum knew it would be rough going in this Legislature for our values — including economic justice, fair taxation, corporate accountability and environmental responsibility — but I’m not sure anyone could have predicted the assault these values would be under in this Legislature.
During the session, far-right legislators like Rep. Janna Taylor, R-Dayton, and Sen. Bruce Tutvedt, R-Kalispell, said they were intent on “cutting spending,” even when proposals to do so made no logical sense (rejecting federal funds for health and human services), were against the will of the people (cuts to Healthy Montana Kids) and were especially cruel (cuts to personal services for seniors and people with disabilities).
Perhaps worse, these same lawmakers were unwilling to support common-sense proposals that would have increased revenue to the state, such as House Bill 222, sponsored by Rep. Dick Barrett, D-Missoula.
HB 222 would have required withholding of income tax at the time of sale on real estate sales of at least $250,000 — but not if the seller were a Montana resident or business, or if the property were a primary residence.
The bottom line: This legislation would have collected a tax — already on the books — from wealthy out-of-staters who sell their expensive vacation homes in Montana. According to testimony by the Department of Revenue, these sellers are sometimes unaware of their tax obligation to the state, but other times, willfully ignore attempts by the state to collect the tax after the sale has been finalized. Collecting the tax at the time of sale would address both of these scenarios.
According to the bill’s fiscal note, this law would have resulted in an increase in income tax collections of more than $3 million each year. HB 222 wasn’t a “new tax.” It didn’t increase a tax rate. It simply provided increased enforcement of a current law. But the bill died in the House Taxation Committee, tabled under the leadership of committee chairman Rep. Mark Blasdel, R-Somers.
At the same time that conservatives were unwilling to help the Department of Revenue collect millions owed to the state through bills like HB 222, they were willing to give up many more millions by supporting measures like Senate Bill 372, a bill that reduced the business equipment tax in Montana.
SB 372, sponsored by Tutvedt and signed by the governor in May, will reduce revenue to the state by more than $14 million in fiscal years 2013 and 2014, and even more in subsequent years. Who are the biggest beneficiaries of the legislation? Conservatives would like you to think that small businesses in Montana will benefit most from this legislation. However, since the first $20,000 worth of business equipment is already exempt from taxation, it’s actually larger businesses that will benefit most. In fact, the largest beneficiaries of the bill will be multinational corporations doing business in Montana, like ExxonMobile and Conoco Phillips. And with big oil companies once again seeing record profits, this is hardly the time to offer them a tax break.
The tide seems to be turning in a progressive direction over the past few months. The push-back against an attack on collective bargaining rights in Wisconsin included tens of thousands of protesters in and around Madison, and the recent election of Democrat Kathy Hochul in a traditionally conservative district of New York state seems to bode well for progressives in 2012.
Like most Wisconsinites and New Yorkers, most Montanans aren’t interested in extreme far-right ideas. They know that the social progress gained in the not-so-distant past must be protected today. Montana values include helping out a neighbor when times are tough and coming together as a community to make every citizen’s quality of life better. As Rep. Jon Sesso, D-Butte, said during the session, “A friend’s good fortune is a blessing,” and Paul Wellstone put it this way: “We all do better when we all do better.”