Kurt Alme, Gov. Gianforte’s budget director, takes questions from reporters during a press conference to unveil the governor’s budget proposal in the Montana Capitol Thursday, Jan. 7, 2021. Credit: Austin Amestoy / UM Legislative News Service

HELENA — As the administration of Gov. Greg Gianforte looks to deliver on his campaign pledge to deliver Montanans a stronger state economy, two key pieces of his budget proposal hit the spotlight before a legislative committee Thursday: lower income taxes for high earners and a capital gains tax exemption on stock options for Montana-grown businesses.

Gianforte Budget Director Kurt Alme and Commerce Director Scott Osterman, backed by a slew of pro-business groups, argued before the Senate Taxation Committee that making Montana’s tax climate more enticing for businesses, remote workers and entrepreneurs will boost the opportunity available to Montana workers in many different corners of the state economy.

“By proposing this bill and the others being heard here today, Gov. Gianforte is sending a message to business leaders and entrepreneurs across the country: We want you and your good-paying jobs,” Alme testified.

“In my opinion, it is working people who create jobs. And they may not see their tax burden lowered. Instead, we should be supporting small and even micro-business owners like myself, who have roots in Montana already.”

Hamilton business owner Jeff Kempka

Opponents, including Democrats and groups that advocate for more spending on public services, derided the measures as unfair to lower-income earners and based on outdated economic theory.

“It’s not a comeback plan for average Montanans, it’s a kickback plan for those at higher income levels,” Senate Minority Leader Jill Cohenour, D-East Helena, said during the hearing. 


Three separate bills backed by the governor were heard before the taxation committee Thursday, each of which needs approval from the Republican-controlled Legislature. The first, Senate Bill 159, would reduce the rate in Montana’s top income tax bracket from 6.9% to 6.75%, cutting taxes for about half of Montana taxpayers.

According to a Montana Free Press analysis, that change would mean fairly small savings for middle-income taxpayers and larger one for high earners: About $16 in annual savings for taxpayers with a gross income of $50,000, and about $443 for taxpayers with a gross income of $350,000 — the threshold where a taxpayer ranks in Montana’s top 1%. A fiscal analysis by the Montana Department of Revenue estimates the cut would reduce state tax collections by about $30 million a year.

The second measure, Senate Bill 182, would create a mechanism that automatically ratchets state income tax rates down further in the event of future budget surpluses. That rate reduction would kick in if state revenues exceed projections and several other conditions are met, such as the state having a full rainy day reserve. Those automatic tax cuts also would target only the state’s top tax bracket.

The third piece of legislation, Senate Bill 184, would exempt shareholders of Montana-grown businesses from paying capital gains taxes when they sell stock options. Proponents noted that employees at startups like RightNow Technologies, the software company Gianforte founded in Bozeman and built into a billion-dollar business, are often compensated partly with an ownership stake that becomes valuable only if the company is successful. They said providing a tax break targeted at stock options of successful startups is a way to encourage more people to commit to entrepreneurship in Montana.

The state currently taxes long-term capital gains, or income on investments that have been held for at least a year, at a rate that’s 2% less than other forms of income. SB 184 would waive that tax entirely on sales of stock in companies that have a majority of corporate officers, at least 30% of employees and at least 25 full-time employees living in Montana. The measure would exclude companies incorporated for the purpose of making real estate investments.

Both SB 159 and SB 182 are sponsored by Sen. Greg Hertz, R-Polson. SB 184 is sponsored by Senate President Mark Blasdel, R-Kalispell.


Osterman argued that the COVID-19-driven shift toward remote work has created an opportunity the state can seize on to drive economic development — and that the suite of tax measures gives the business community tools they can use for that purpose.

“We have the chance to attract wage earners from across the country who are looking to make Montana home,” he said. 

“The governor does want to continue to pursue reducing our top income tax rate down to where it is competitive with other states, but we need to do so incrementally.”

Budget Director Kurt Alme

Without the tax cuts, Osterman and Alme argued, some potential job creators will pass over Montana for neighboring states with lower income tax rates. Montana previously cut its income tax rates in 2003, Alme said, but neighbor states have since shifted their own rates downward to be more competitive, again putting Montana in the position of looking relatively business-unfriendly in comparison to its peers.

Montana is the only state in the Rocky Mountain West without a statewide sales tax.

Alme said the governor would like to bring the state’s top income tax rate down to 5% to make Montana competitive with Arizona, Utah, Colorado and New Mexico. However, he said, the COVID-19 pandemic has made it tricky to predict how much the state will collect in income taxes next year — hence the two-part approach of an incremental rate cut now and the SB 182 mechanism, which will provide a way to further reduce taxes if the state economy bounces back strongly.

“The governor does want to continue to pursue reducing our top income tax rate down to where it is competitive with other states, but we need to do so incrementally,” Alme said.

Alme also said that even with the three measures and others included in the governor’s budget, it doesn’t call for significant cuts to public services and will leave the state with healthy reserve levels.


Opponents, though, said the notion that tax cuts for the wealthy will promote widespread economic opportunity has been discredited by modern economic research. They cited a study published last year by researchers at the London School of Economics that examined 50 years of tax policy in 18 countries to conclude that major tax reductions for the wealthy lead to higher income inequality without creating significant economic growth or reducing unemployment. 

Heather O’Loughlin, director of the left-leaning Montana Budget and Policy Center, testified she is concerned about the consequences of having Montana participate in a “race to the bottom” by cutting taxes on high earners.

“It’s not a comeback plan for average Montanans, it’s a kickback plan for those at higher income levels.”

Senate Minority Leader Jill Cohenour, D-East Helena

She noted that some of the states cited as competitors for Montana regarding income tax, like Colorado and Wyoming, have run into major budget crunches in recent years. Wyoming, for example, which has no income tax and is heavily reliant on natural resource taxes, was forced to cut its budget by hundreds of millions of dollars last year.

“Montana cannot afford this, given the continued budgetary needs across the state,” O’Loughlin argued. “This proposal will have long-term ramifications on our ability to invest in education, senior services and public safety.” 

Jeff Kempka, who owns a sign-painting business in Hamilton, said he didn’t see the point of competing with neighboring states in an effort to attract the most wealthy residents.

“In my opinion, it is working people who create jobs. And they may not see their tax burden lowered,” Kempka said. “Instead, we should be supporting small and even micro-business owners like myself, who have roots in Montana already.”


Three other Gianforte budget bills have had or will be getting initial hearings in legislative committees this week. House Bill 303, which exempts some businesses from paying the state business equipment tax, had its initial hearing Tuesday, as did House Bill 252, which provides tax credits to encourage employer-funded trade education. A sixth measure, Senate Bill 181, which revises Montana’s corporate income tax, will be heard in the Senate Taxation Committee on Friday.

In order to move forward in the legislative process after their first hearings, bills generally need a supportive vote from their initial committee. The House Taxation Committee voted to forward the business equipment tax bill to floor debate Thursday. The five other bills were still awaiting a vote.

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This story is published by Montana Free Press as part of the Long Streets Project, which explores Montana’s economy with in-depth reporting. This work is supported in part by a grant from the Greater Montana Foundation, which encourages communication on issues, trends, and values of importance to Montanans. Discuss MTFP’s Long Streets work with Lead Reporter Eric Dietrich at edietrich@montanafreepress.org.

Eric Dietrich is a journalist and data designer and the founder of the Long Streets economic reporting project. His reporting focuses broadly on Montana’s governance and economic opportunity, with particular focus on the state budget and tax policy. He also contributes data reporting across the MTFP newsroom. Before joining the MTFP staff in 2019, he worked for the Great Falls Tribune, Bozeman Daily Chronicle, and Solutions Journalism Network and also earned an engineering degree from Montana State University. Contact Eric at edietrich@montanafreepress.org, 406-465-3386 ext. 2, and follow him on Twitter.