Montana’s wealthiest taxpayers are poised to receive half of a $791 million pot of federal tax breaks proposed by the U.S. Senate Republicans with Montana’s remaining households splitting up the rest, according to Montana’s Department of Revenue.
Analysis by DOR economists shows the wealthiest 3.4 percent, or 15,300 households earning at least $196,575 a year, would receive $386.5 million of the tax cuts headed to Montana in 2018. The remaining $404 million would go to the state’s other 475,000 filers.
“The top 10 gets more than half the tax cut,” said Ed Caplis of the Montana Department of Revenue. Benefits offered to the top 10 percent would be permanent. Tax cuts offered to Montanans earning $100,000 or less would expire after a few years, unless lawmakers voted to renew them.
Most Montana tax filers would receive a tax break of at least 2 percent and at least a $50 cut at the beginning. A vote on the bill is expected later this week.
Tax breaks for the wealthiest 3.4 percent of Montana filers would be more than $25,000 a year.
The bulk of Montana’s households, the 180,000 reporting $20,000 and $64,000 a year in income, would see a tax cut of $788.
There would be little to no change in taxes paid by household with less than $20,000 in annual income.
A House tax reform bill already passed would offer deeper cuts to Montana taxpayers. State revenue officials estimate Montana filers collectively would see a $951 million cut in federal income taxes. The wealthiest 3.4 percent of Montanans would receive $410 million of the House cuts.
State income tax collections are expected to increase $26 million because of the elimination of some federal deductions, which affect the adjusted gross income reported to the state.
The state analysis included several caveats. The results considered only individual income tax, not changes to corporate income tax, which revenue officials are still studying. The analysis looked out five years and does not reflect what happens to Montana taxpayers when temporary provisions begin expiring.
The Senate tax reform bill is still being worked on. The state was able to analyze earlier versions, which may vary from the final version expected to be voted on by week’s end.
Montana Republicans Sen. Steve Daines and Rep. Greg Gianforte said Montanans stood to benefit from the bill.
“Tax cuts that passed the House will let hardworking Montanans keep more of what they earn, create thousands of Montana jobs, and unleash economic growth in our state. Low- and middle-income Montanans will see a big tax break with cuts to their tax rates and with the doubling of the standard deduction,” Gianforte said in an email. “Montana families will benefit from an increased child tax credit. Small businesses will see the lowest tax rate on their income since World War II, and America’s businesses will become more competitive, keeping American jobs here and bringing their profits back home.”
Gianforte emphasized that by doubling standard deductions, the House tax reform plan would offer savings to Montanans who don’t itemize their taxes currently.
Daines said a Montana family of four earning $73,000 a year would expect a $2,200 tax cut, while a single parent earning $41,000 a year with a deduction for one child, would save $1,400.
Daines is a ”no” vote on the tax bill currently because he says it doesn’t do enough for business owners reporting earnings as pass-through income on their federal tax reports.
Tester told The Gazette earlier that he was worried the $1.5 trillion deficit created by cutting taxes, but not spending would burden America’s children and grandchildren with debt. His staff said Tuesday that it agreed with the state analysis.