Senate committee votes down Gianforte’s income tax cut, property tax relief bills

The Montana Senate Taxation Committee voted down two major tax bills backed by Gov. Greg Gianforte Wednesday, killing a measure that would have cut a full percentage point off the state’s primary income tax rate and another that would have increased property taxes on second homes as part of efforts to lower homeowner tax bills.

The Republican-controlled committee, chaired by Sen. Greg Hertz, R-Polson, also voted down an income tax credit-based property tax relief bill that minority-party Democrats had pushed through the House.

Separately, the Senate Finance and Claims Committee killed another major income tax bill that had been backed by Senate President Matt Regier, R-Kalispell, and had attracted some support from Democratic leaders.

That bill, Senate Bill 203 was resurrected with a Senate floor vote hours later. A similar effort to revive the governor’s tax bill failed.

Before Wednesday’s vote on the governor’s income tax bill, Hertz said he supports income tax cuts but thinks the state needs to move more slowly than the governor has proposed.

“I think it pulls off too much money, too fast, at the top,” Hertz said.

The Gianforte-backed income tax bill failed on a 7-1 committee vote, with only Sen. Wylie Galt, R-Martinsdale, supporting it. The governor’s property tax bill failed on a 5-3 vote.

Wednesday’s vote flurry began to cull what has been a crowded field of bills aiming to address widespread concern about rising residential property taxes and implement the Republican governor’s desire to continue cutting the state’s top-bracket income tax rate. While the two bills could be resurrected or salvaged for parts as negotiations between various legislative factions continue, the committee votes indicate a critical mass of lawmakers are currently inclined to pursue other approaches.

The votes on two of his flagship bills also represent a setback for Gianforte, who initially wanted his property tax plan passed by mid-February and has long touted lowering income taxes as one of his central policy goals. The governor advocated for his income tax bill at an Americans for Prosperity rally on the steps of the Montana Capitol last week and sent a press release Monday after Donald Trump Jr., the president’s son, posted on social media in support of the proposal.

In a statement following Wednesday’s votes, a spokesperson for the governor’s office said Gianforte is still hopeful this year’s Legislature will pass “meaningful” income and property tax cuts.

“Nothing is over until the legislature gavels out,” Press Secretary Kaitlin Price wrote in an email. “While the governor is disappointed in today’s votes, he believes Montanans deserve and expect permanent, meaningful income and property tax cuts to keep more of what they earn as they struggle with our nation’s affordability crisis.”

Gianforte’s income tax proposal, Senate Bill 323, would have cut the state’s top-bracket tax rate for non-capital gains income from 5.9% to 4.9% and expanded a tax credit for working families, eventually reducing state revenues by more than $300 million a year.

The competing Senate-side proposal resurrected Wednesday, SB 203, would instead raise the income threshold where the top-bracket rate kicks in — from $21,100 to $100,000 for individual tax filers — so many taxpayers would have most of their income taxed at a lower 4.7% rate. That bill’s price tag is estimated at about $230 million a year.

Two other major income tax bills also appear to be in the mix. House Bill 337, which is sponsored by Speaker of the House Brandon Ler, R-Savage, passed the House Wednesday. 

In its current form, HB 337 is something of a compromise between the two Senate income tax bills, reducing the top-bracket tax rate to 5.65% and bumping the limit for the lower 4.7% bracket up to $47,500 for individual filers. It also expands the working family tax credit. Its price tag is estimated at about $260 million a year.

Senate Bill 546, sponsored by the Sen. Dave Fern, D-Whitefish, was also resurrected Wednesday after being voted down in committee. It would create a tax credit targeted at low- and middle-income taxpayers, costing an estimated $200 million a year. 

The defeat of the governor’s property tax bill, House Bill 231, leaves a wider field open as several active property tax measures meander through the Capitol halls.

HB 231 was developed by the Legislature’s longtime budget guru, House Appropriations Chair Llew Jones, R-Conrad, through a property tax task force Gianforte set up last year. It would have reworked the rates that determine how much home value is considered taxable value for property tax purposes, offering tax cuts for homeowners and landlords and offsetting the cuts with higher taxes on second homes in an effort to avoid shifting taxes onto smaller businesses.

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An email sent to some of the state’s most prominent business lobbyists by the lawmaker advancing Gov. Greg Gianforte’s signature property tax relief bill indicates that the bill may be in political jeopardy as it competes with another proposal moving through the Montana Legislature. The sponsor carrying the governor’s bill, Rep. Llew Jones, R-Conrad, expressed optimism he could salvage his legislation.

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The support of the governor and Jones, the de facto leader of the Legislature’s comparatively moderate Republican Solution Caucus, had made HB 231 the odds-on favorite as various property tax relief proposals jockeyed for the votes necessary to push the bill to the governor’s desk. Democrats and Republicans have sponsored competing measures, however, some of which have now outsurvived it.

In an email sent to a group of business lobbyists last weekend, Jones indicated that House Bill 528 may have emerged as “the preferred bill” for implementing property tax cuts. Sponsored by Rep. Ed Byrne, R-Bigfork, that bill implements essentially the property tax policy that Democratic candidate Ryan Busse championed during his unsuccessful bid for governor last year. It specifies a sweeping rebalancing of residential, commercial and agricultural tax rates that would cut the tax valuations of residential properties by 44% in an effort to reset tax values to a pre-pandemic baseline.

Jones has maintained HB 528 would significantly increase taxes on business properties, especially in rural areas that have seen below-average home value growth. Regardless, the bill passed Jones’ House Appropriations Committee on a narrow 12-11 vote Tuesday evening, with the committee adding an amendment limiting how much the bill would reduce state-level school taxes. In order to make it to the governor’s desk, HB 528 must clear two more rounds of floor votes in the House by Saturday, April 5.

In addition to House Bill 154, the tax-credit-based property tax relief bill that was voted down Wednesday, Democrats have pushed House Bill 155, which aims to lower taxes for many homeowners by leaning harder on high-value residential properties regardless of whether those properties are second homes. HB 155 passed the House in February and is pending before the Senate Taxation Committee.

The other major property tax proposal still in the mix is Senate Bill 90, which in its current form would divert some of the state’s lodging tax to fund fixed-dollar property tax credits, potentially giving homeowners a $240-a-year credit on their tax bills. Some lawmakers have suggested that figure could be increased by measures that would give the credit system created by the bill additional funding.

SB 90, which passed the Senate in February, is pending in the House Taxation Committee.