Billion-dollar tax rebate, spending package heads to governor’s desk

A suite of bills allocating a billion-dollar chunk of Montana’s $2.5 billion-plus surplus toward tax rebates and other spending measures cleared the final Senate votes standing between them and the desk of Gov. Greg Gianforte this week.

If, as is likely, Gianforte signs the bills into law, they would tee up the state to issue income tax rebates of up to $1,250 per taxpayer and property tax rebates of up to $1,000 per homeowner. Combined, those rebate efforts would pull an estimated $764 million from state coffers.

Other bills in the six-bill package — dubbed “the six-pack” by lawmakers — would pay down state debt, cut business equipment taxes on some business owners, reduce capital gains tax rates and allocate $100 million to 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 have called the rebates a way to compensate taxpayers who have paid the state more than was actually necessary to fund the operation of state government over the last two-year budget cycle. They’ve also said the rebates will help Montanans tackle the burden rising inflation has placed 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.

Minority party Democrats have generally resisted the rebate and tax cut bills, saying they believe lawmakers are authorizing too much spending too early in the session before spring revenue estimates are available and the Legislature has hashed out how much funding is necessary for other priorities, such as stabilizing 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.”

During House and Senate floor debates on the bill that would authorize property tax rebates, Democrats made unsuccessful attempts to bring amendments that would provide property tax rebates to renters as well as homeowners.

The eight major tax and spending bills now headed to the governor are as follows:

• 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.