Get Ready for the One-Two Punch: Anticipated Cuts to SNAP, Medicaid, and Possibly More

As the U.S. Senate & House conferees are crafting the final GOP tax plan behind closed doors in conference committee, we already have a strong sense of who wins and who loses under this bill. Any changes that happen before the chambers vote during the week of December 18th will not repair the devastating provisions of either the House-passed or Senate-passed bills.

As we anticipate the passage of this final tax legislation, we want to turn toward the details of the future implications of a tax bill that adds $1.5 trillion to the national deficit over ten years.

Get ready for the one-two punch: anticipated cuts to SNAP, Medicaid, and possibly more.

As we expected during the federal budget resolution process in the fall, the tax bill that congressional Republicans are finalizing is just step one of a likely two-step tax and budget agenda. The plan looks like:

  1. Cut taxes now that are heavily skewed toward wealthy households and profitable corporations.
  2. Then decry the enlarged deficits that those tax cuts fuel — and insist that they require cuts to programs for mainly low- and middle-income families.

Republican leaders have repeatedly said in recent weeks that after enacting a tax bill, they will turn to budget cuts — particularly “welfare reform,” long a code for cuts to SNAP (formerly known as food stamps), Medicaid, Medicare, among others that help families of limited means afford food, housing, health care, and other basic needs.

Approximately 1 in 8 Montanans struggle with hunger, including 45,000 children living in food insecure homes. Cuts to SNAP would hurt families with kids, seniors, and people with disabilities. As for health coverage, about 232,000 Montanans are insured through Medicaid and Medicaid Expansion as of September 2017. Cuts to Medicaid would be devastating for our state, which is already grappling with an opioid epidemic, as well as major funding cuts to support rural health care needs and Montanans with disabilities.

The budget resolution that Congress approved in October, which created the process and set the parameters for the current tax bill, also calls for $5.8 trillion in budget cuts over the coming decade, including deep cuts in Medicaid, Medicare, and other health care programs; basic assistance including SNAP; and non-defense discretionary funding, the part of the budget that funds education and training, transportation and other infrastructure, medical research, child and elder care, and other important priorities.

GOP leaders appear already poised to seek large budget cuts next year before the final tax legislation makes it to the President’s desk.

Ultimately, the true winners and losers of this federal tax proposal and the subsequent plan to cut services that hundreds of thousands of Montanans rely on haven’t changed with small tweaks to the proposals. Low- and middle-income folks, working families with children, and Montanans with health care needs are all set up to fail if the GOP tax proposal becomes law.

Why the Senate Tax Bill Hurts Montana Small Businesses & Main Street – Even with a change to benefit pass-through entities

On Monday Senate Daines announced that he would vote “No” on the Senate tax proposal, citing that the current bill does more for large corporations at the expense of small businesses. While we appreciate Senator Daines’ concern that this bill doesn’t work for Montana, the issues and threats we face in this tax bill are far greater than this narrow issue.

Daines’ concern relates to the provisions for pass-through entities. Pass-through entities include partnerships, sole proprietorships, S-corporations, and other companies whose earnings pass straight through to owners’ individual returns, rather than being taxed at the corporate level.

The current Senate bill includes a new deduction for taxpayers who have income from a pass-through entity. The Senate bill provides a 17.4 percent deduction on income earned from pass-through businesses, effectively bringing the taxpayers top tax rate down to about 32 percent. Senator Daines is calling to increase this deduction to 20 percent on income, which would further lower their rate.

However, small tweaks like this one do not fix this bill. There are several key provisions of the Senate tax plan that are far more harmful to middle-class Montanans and small businesses, which Senator Daines has not yet addressed.

For example, decreasing the corporate tax rate from 35 percent to 20 percent largely benefits large corporations that are experiencing record profits, while tax revenue from the same group has been plummeting. The decrease in the corporate tax rates further tilts the scales in favor of large corporations, giving them an unfair edge over Main Street small businesses. 
At the end of the day, the Senate bill’s corporate tax cuts are permanent, while pass-through entities would see a tax hike by 2027 because the deduction is a temporary provision set to expire after 2025.

Repealing the State and Local Tax (SALT) deduction means increased taxes for small business owners and their customers, and increased pressure on state budgets.

Finally, repealing the individual mandate requirement under the Affordable Care Act would cause 13 million Americans to become uninsured. The increase in uncompensated care costs could force some providers to close their doors or cut back spending in ways that undermine the quality of care. Providers might also raise prices, shifting costs to people with private insurance coverage (including employer coverage). Or, states or the federal government might be forced to step in to cover some of these uncompensated care costs, shifting costs to taxpayers.

Regardless of what changes are made to the Senate tax bill before a vote later this week, this proposal is still bad for Montana, and it does nothing to help working families. Main Street small businesses don’t benefit from tax cuts to millionaires and billionaires. They deserve Congress to work in a bipartisan manner to find ways to really help small businesses.

More state budget cuts could be on the horizon: How much more can our communities take?

The Montana Budget and Policy Center staff spent their weekend pouring over the 10 percent reduction plans submitted by each state agency to the governor’s office. These plans, totaling over 220 pages, provide a glimpse at how painful these cuts could be for services for Montana families and support for schools, local law enforcement, and counties.

It’s important to note that these proposed 10% reduction plans are coming on top of $218 million in cuts that happened during the legislative session and this summer.

As we’ve discussed in previous blogs, according to the governor’s budget office, the state now faces a $227 million shortfall. In order to restore the ending fund balance back to where it needs to be, the governor and legislature can make further cuts and/or find new revenue. While the governor has some authority to make cuts on his own, the law limits him to cutting no more than 10% in each agency program. In order to reach the $227 million, the governor would have to take the full 10% of cuts in nearly every program.

In other words, if the governor and legislature do not come together to find additional revenue, the governor may be forced to address the budget crisis entirely through cuts and would have to accept nearly everything contained in the agency reduction plans. In that scenario, the Department of Health and Human Services (DPHHS) would experience the largest cut. According to the department’s reduction plan, the general fund cuts total $105 million and would also result in the loss of $135 million in federal funds, for a total loss of $240 million.

Potential cuts to DPHHS include:

  • Eliminate health case management for foster children, provided by Missoula and Cascade County Health Departments and Riverstone Health (Billings).
  • Eliminate supplemental payment to foster parents caring for infants and toddlers to help defray costs for diapers.
  • Cut orientation and mobility skill instruction for 300 children with low vision or blindness.
  • Cut grants for child care providers that help improve quality care.
  • Cut over $2 million in funding for non-profit organizations in Billings, Missoula, and Helena that provide housing and support for teenage mothers.
  • Eliminate partnership with Children Advocacy Centers that provide multidisciplinary evaluation of children victims of violence. This work and cost would be shifted back to local law enforcement agencies.
  • Eliminate funding for mentoring of foster children through eight Big Brothers Big Sisters organizations across the state.
  • Cut funding to domestic violence shelters across the state.
  • Cut $400,000 provided to tribes to assist with foster care placement of tribal children currently in their care.
  • Cut an additional $48 million in targeted case management for individuals with disabilities and those experiencing mental health and substance use disorders (this is in addition to cuts made earlier this year).
  • Eliminate funding for services for developmentally disabled and at-risk children ages 0-36 months.
  • Eliminate Medicare prescription drug benefits for over 10,000 low-income seniors.
  • Cut $6.8 million in services for home and community-based services for seniors and people with disabilities who want to stay in their home or community, likely forcing more Montanans into nursing home care.
  • Cut $8.5 million in hospice services.
  • Cut $15.5 million in personal assistant services for seniors and people with disabilities living in their own home.
  • Eliminate health insurance coverage for direct care workers who are already struggling to make ends meet.
  • Cut $23 million in reimbursement rates for hospitals providing care to Medicaid patients, including cuts to payments for Montana’s rural critical access hospitals. These cuts could mean reduced access to services in rural Montana.
  • Eliminate Medicaid’s coverage for some dental services, which could impact over 44,000 Montanans and 585 dentists providing coverage to Medicaid patients.
  • Cut $1.6 million in chemical dependency treatment.
  • Reduce grants to counties for mental health crisis intervention.
  • Close 19 offices of public assistance in rural Montana, impacting many families’ ability to access assistance and services.
  • Leave significant number of staff positions vacant through biennium (between 8% and 18% of positions in each division will be left unfilled).
  • For some remaining Department staff, mandatory furloughs that will cut hours by 7% to 12.5%.

This list is just cuts to DPHHS. Make no mistake, every program in every agency is facing cuts, but there is time to do something about it. The governor and legislators must come together to find a balanced solution to this crisis. Otherwise Montana is set to take a total of $500 million in general fund cuts in this biennium.

While some cuts may be inevitable, common sense measures to increase the tobacco tax and close tax loopholes would mitigate deeper cuts that will hurt our communities. These proposals should be part of the conversation. There are solutions to ensure that our tax system is fair, raise critical revenue, and help Montana be the state we all love to live in.

Equal Pay Day and EITC

Now that spring is in the air, 2016 seems like a long time ago. But it took until today – April 4th – for women to finally earn as much money as a man did in 2016. With such a significant pay disparity between men and women, women have to work three months longer into the next year to make the same amount that men make in a single year.

In Montana, women still are paid only about 67 cents for every dollar a man earns in spite of the fact that more women than ever are the primary breadwinner. In about 40 percent of U.S. households with children under age 18, mothers are the sole or primary breadwinner. For female-headed households, it hurts a lot more when women aren’t paid fairly.

The good news is that a state Earned Income Tax Credit (EITC) could help boost the pay of thousands of low income women. The legislature is considering HB391, which would create a state version of the federal EITC, a tax credit paid to working adults. The Center on Budget and Policy Priorities estimates that 22,000 single mothers in Montana would benefit from receiving the EITC.*

But the EITC does far more than just provide a little extra cash for families. Studies show that the EITC has encouraged large numbers of single mothers to increase the amount of hours they work, and reduce their reliance on social safety net programs. In turn, this increase in hours worked leads to higher wage growth down the road, as well as greater Social Security retirement benefits. The EITC’s impact on employment actually doubles the anti-poverty effect of the EITC for families.

Furthermore, the benefits of the EITC for women aren’t purely financial. Research has also shown that it reduces the rate of low-weight and premature births and improves the health indicators of the mothers. In these studies, women who have received increases in their EITC were more likely to receive prenatal care.

For thousands of workers in Montana, a state EITC could have significant impacts for parents and children alike. In total, 80,000 low- and moderate-income families in Montana stand to benefit from this credit. But for 22,000 single mothers, the EITC can provide additional important benefits that will help improve the stability and health of the entire family.

All hard-working Montana families should get the pay they deserve. While we may have a long way to go in order to minimize the disparity in pay between men and women, a state EITC can be a positive step to reduce the harm this gap causes. Our state legislators should enact a state EITC and improve the lives of thousands of working mothers and their children.

 

* CBPP estimates based on data from IRS, unpublished data from the Brookings Metropolitan Policy Program, and CBPP analysis of the Census Bureau’s March 2010-March 2014 Current Population Survey

Why Moms AND Dads Need Paid Leave

When a new baby enters the family, everyone’s life turns upside down. While mothers might need paid leave while they recover from childbirth, it is vital that fathers are also home to participate in family life during those earliest days.

As we wrote about yesterday, the legislature is considering H.B. 392, which would establish a family medical leave insurance program (FAMLI). The FAMLI Act would combine small amounts from employees and employers (less than one percent of wages) to create a dedicated funding stream for workers when they need time off to care for themselves or a loved one. From these small contributions, workers would receive a portion of their wages while on leave.

But it’s not just new mothers who need paid leave. When fathers are able to take even just two weeks paternity leave, they are more active caregivers – feeding, changing diapers, and rocking the baby to sleep in the middle of the night, even well after he has gone back to work. The more engaged fathers are with their children, the better developmental outcomes are for the kids, from improved cognitive ability to fewer behavioral problems.

While paid paternity leave has obvious financial benefits for the dad, it actually can boost employment and earnings for moms too. Studies from Canada and Sweden show that when men take leave, women are better able to return to work because they have a trusted and affordable source of childcare at home.

Right now, only 13% of men have access to paid leave, meaning that many fathers take far less time at home with their families than they would prefer because they simply can’t afford it. In California, a state with a similar paid leave program, one-third of men took time to bond with their children in 2014, compared to only 21% in 2007. This increase in popularity shows that men want to spend time caring for new family members, when they can afford to do so.

Paid leave provides both men and women the opportunity to provide for their families physically and financially. The benefits of an involved dad last far longer than the just during the newborn days – they can last a lifetime.

Paid leave benefits many types up families as well, including workers who have aging parents to care for, or someone who is facing a serious illness. For single workers who might not have other means of support, paid leave can be a lifeline. Everyone benefits when they have the ability to provide for their family.

Paid leave models like this have been successful in other states, and are an important measure that benefits both families’ health as well as their financial stability.

If you want to read more about the benefits of paid leave, be sure to check out MBPC’s series on the topic.

Montana Family and Medical Leave Insurance Act: A Bill to Support Montana Families

When faced with an illness, caring for a loved one, or a new child entering the family, many Montana workers are forced to choose between taking time off to care for their family, and financial stability.

But a new bill before the legislature (H.B. 392) gives Montanans a chance to provide for the families to face these hurdles without taking a financial step back. The Montana Family and Medical Leave Insurance Act (the FAMLI Act) combines small amounts from employees and employers – less than one percent of wages into a pool, from which eligible workers could receive a portion of their wages while on leave.

While the Family and Medical Leave Act (FMLA) of 1993 provided workers with some job security, the law only guarantees unpaid leave. Without pay, many workers are not able to take as much time off as they need to adequately take care of themselves and their families. And if they do, the loss in wages may mean difficulty paying the rent or putting food on the table.

Some companies do provide paid leave, but they are the minority. Less than a quarter of workers in the private sector had access to any type of paid sick or family leave.

And when families and workers miss out on wages, everyone suffers. Not only do families face financial insecurity, but the local businesses where they would have spent their wages do as well. Small businesses who wish to not only take care of their workers, but also compete with the benefit packages larger companies offer, benefit from a more equal playing field.

California, New Jersey, and Rhode Island have instituted paid leave programs for workers in their states, and have been reaping the benefits for years. In fact, one study found that women who used paid leave were less likely to need public assistance and Supplemental Nutrition Assistance Program (SNAP) benefits. The study also found that women were much more likely to be working within the year after their birth, and also had higher wages. Montana has the opportunity to see the same benefits by enacting the FAMLI Act.

Paid family leave can help strengthen the economy, local businesses, and improve the economic and physical health of families. A cost effective program like the FAMLI Act can help strengthen all working Montanans and their loved ones. It’s time for paid leave in Montana.

To read more about how paid leave could benefit Montana, be sure to read MBPC’s report: Helping People Balance Work and Family: It’s Within Montana’s Reach.

Oil and Gas Tax Holiday: It is time to end this free ride

The 2017 Montana Legislature has been marked with concern over massive budgetary cuts and the major shortfall in revenue. While not all cuts can be avoided, the legislature should take a balanced approach to ensure the state can continue to invest in our families and communities. This includes ensuring we have adequate revenue in the state by putting in place common sense measures to ensuring wealthy corporations are paying their fair share.

Earlier this session, the House Taxation Committee heard House Bill 215, an act revising the rate of tax for certain oil and natural gas production. Reducing or even eliminating this tax break, called the oil and gas tax holiday, is one step toward balancing the budget and making sure corporations are paying their fair share. Unfortunately, the House Taxation Committee tabled HB 215 earlier this week.

The oil and gas tax holiday is a policy that allows newly drilled wells to be taxed at a substantially lower tax rate during the beginning of production. Wells, however, produce significantly higher amounts of oil and gas at the start of usage, which means these oil companies receive this tax break during the most profitable period of extraction. While some argued these tax holidays attract developers and increase revenue, the data clearly shows such tax holidays only suppress potential state revenue and does little to increase developer interest.

Montana, despite its lower tax policies, is not outperforming neighbors with higher tax policies. Wyoming, New Mexico, and North Dakota all have higher taxation rates for oil companies. All three states have consistently out produced Montana in terms of barrelage. Oil and gas companies do not seek to drill based upon the tax policy of that area. They drill where there are natural resources available.

Montana has lost millions of dollars in revenue due to this tax policy. From 2008 to 2014, the tax holiday cost the state and counties $265 million in revenue. This money could have been used to pay for public services, such as schools and roads. In oil-producing counties, especially those near the Bakken region, they have been forced to deal with increased demand on their infrastructure, but no increased revenue to update such necessary services.

HB 215 proposes to increase in Montana’s production tax would to 4.5 percent, which is still lower than the national standard of 9.26 percent. But even this small step is crucial in insuring our legislature can make strategic investments in Montana communities.

The increased revenue could be used to assist in failing infrastructure, public services, and our schools and universities. Oil and industry should not get a free ride in this state. We all need to pay our fair share especially when so many Montanans are struggling with significant budget cuts.

Water’s Edge Election: It is Time to Eliminate this Corporate Tax Break

On Thursday, the Senate Taxation Committee will hear Senate Bill 105, repealing the water’s edge election for corporate income tax purposes. The water’s edge election represents a multi-million dollar giveaway to large multinational corporations operating in Montana, and SB 105 aims to level the playing field for Main Street businesses across the state while also ensuring we have adequate revenue here in Montana to invest in our communities.

What is the water’s edge election, and why should we eliminate this corporate tax break?

First we need a refresher on combined reporting, which is the way Montana taxes corporations. Many large companies consist of a parent company and its subsidiaries. Combined reporting requires a parent company to add its income and its subsidiaries’ incomes for the purposes of state corporate income taxes. Montana then taxes its share of the total income based on the level of activity in Montana as a percent of the company’s total activity. States without combined reporting are vulnerable to a wide array of tax avoidance strategies by corporations which usually involve artificially shifting profits to subsidiaries that are in states without corporate income taxes or that do not tax a specific type of subsidiary.

Combined reporting ensures that corporations pay their fair share of taxes in Montana based on their corporate activity in Montana. In addition, it levels the playing field for smaller Montana-based companies that do not have subsidiaries across the country to which they can shift profits.

Montana requires worldwide combined reporting, which means that corporations with common ownership must report all income worldwide basis. Montana provides an exception to this rule, called the water’s edge election, which allows multinational corporations to only report their income within the borders of the United States, rather than their worldwide income. In exchange, these companies agree to pay a 7% tax rate, rather than the normal rate of 6.75%. The number of corporations that filed a water’s edge election in Montana increased 226% from 2007 to 2012.

There are some limits to the water’s edge exclusion. If a subsidiary is located in a country that is a known tax haven, the corporation may not exclude that subsidiary’s income even under the water’s edge election. In order for this exception to be useful and avoid inappropriate income shifting, the list of tax havens must be updated regularly in Montana law. Unfortunately, the Montana legislature has failed to update the list of tax havens in past sessions.

A cleaner way to address the inequities and level the playing field for Montana small businesses would be to eliminate the water’s edge election entirely. The Governor has called for the elimination of the water’s edge election in his budget, and the Senate Taxation Committee will hear Senate Bill 105 to do just that. The bill will eliminate the ability of multinational corporations to shift profits overseas without paying state corporate taxes reflecting actual operations in the state. We need out-of-state corporations to pay their fair share for the schools, roads, and bridges they rely upon for the success of their business.

MBPC recently wrote a report on how Montana taxes corporations. You can read that full report Policy Basics: Montana Corporate Income Taxes.

Vacancy Savings: More Harmful Than You Think

For the past few months, Montanans have been hearing about the current shortfall in revenue in this past year than the legislature previously projected. This reality will make this biennium’s budget debate tougher than the past few sessions. While targeted cuts are likely in the face of this leaner revenue projection, it is also important to remember that the investments we make – from quality schools, improved roads, and public safety – help create thriving communities where we can all live and work.

As the budget moves forward, we will walk through some of the terms and what legislators are considering during the debates.

One budget cutting measure often used is “vacancy savings.” Vacancy savings is the difference between what it would cost to fully fund all of an agency’s approved positions and what is actually spent for personal services because positions were vacant for part of the year.

The Legislature can mandate a certain amount of vacancy savings by appropriating less than the amount needed to fully fund all of an agency’s positions. When vacancy savings are higher than naturally occur because of turnovers, agencies must leave positions open for longer than normal or decide not to rehire.

Since 2003, most agency budgets have included a four percent vacancy savings rate. This rate has fluctuated in past sessions. In this session, the Governor’s proposed budget reflects a four percent vacancy savings for most agencies. However, the joint Appropriations and Finance & Claims Committees are considering even further cuts from the Governor’s proposed budget, including an additional two percent vacancy savings.

While some will argue vacancy savings as a harmless cost cutting measure, the reality is that vacancy savings results in the loss of state jobs and potential of services to be cut or reduced in communities. State agencies that we all rely upon must continue to do more with fewer resources and fewer staff. The effects of these cuts are seen across the state, in both small and large communities.

However, there is something the legislature can do about our current financial position – we can bring in more revenue. There are a variety of ways we can make our tax system fairer and raise much needed revenue for our public schools, higher education, health care, infrastructure, and public safety. We can close loopholes and stop the unfair tax breaks that benefit the super wealthy and out-of-state corporations. We can make sure that we are all pulling our weight and have enough revenue to invest in our communities.

Governor Proposes Tax Fairness in his Budget

Every two years, the Governor of Montana releases their budget proposing investments to support our communities, including education, workforce development, and infrastructure. The budget becomes the marker for what the legislature will consider in the upcoming session. Yesterday, Governor Bullock released his proposed budget for the 2019 biennium (fiscal years 2018 and 2019). Over the course of the next week, we will highlight some of the key components of the budget and walk through some of the logistics on what happens now.

Today, we start with high-level overview of the budget and some of the tax fairness measures that will be up for discussion in the session.

But first, we need to set the stage for what the Governor was facing as he put together this biennium budget. Over the past year, the state has experienced lower revenue levels than previously projected. While the state initially estimated that we would begin the 2017 session with a strong ending fund balance of over $300 million, that amount now stands at around $120 million for the start of the session.

What has happened to cause such a shift? One of the primary reasons is lower oil and gas tax collections as a result of lower production and price. Montana has also seen a slight dip in individual income tax and corporate income tax collections. Both Legislative Fiscal Division and the Governor’s budget office have forecasted that this drop of revenue is short-term – both agencies anticipate revenue growth rate to begin to pick up again in FY2018 and FY2019. (It is worth noting that while revenue in Montana has been strong over the past 5 years, we have lost nearly a billion dollars in the past decade due to tax cuts aimed at wealthy households.)

To address the revenue drop – at least, in part – the Governor’s budget proposes a series targeted tax fairness measures that will also improve our current levels of revenue. Now, to be clear, the Governor’s budget also proposes across-the-board cuts to nearly every state agency. But by addressing the inadequate levels of revenue in the state, he’s been able to lessen the cuts and provide strategic investments in infrastructure, schools, quality child care and early childhood development, economic development in Indian Country, and an increase (albeit modest) in wages for state employees. We will dig into some of these sections on the expenditure side in future blogs. Today, we want to give everyone some background on the tax fairness measures the Governor is proposing.

Earlier this year, we released a report that provided an overview of levels of lost revenue in Montana as a result of tax cuts in 2003 that primarily went to the wealthiest households. Before 2003, Montana had ten income tax brackets with a top marginal rate of 11%. The 2003 legislation eliminated (or collapsed) nearly half of those tax brackets and lowered the top rate to 6.9%. Today, an individual working full-time at minimum wage (about $16,700 a year) now has the same top tax rate as someone making $1 million. The 2003 law also created a tax break for income coming from investments (as opposed to wages). Today, an individual who earns a living through wages is actually taxed at a higher rate than someone making the same amount of money but through investments, like selling stock. Montana is one of only nine states that provide this tax advantage to investors, and it cost the state nearly $30 million in 2013.

chart-2

Overall, these tax cuts have cost the state hundreds of millions of dollars in lost revenue, with 55% of the benefit going to the wealthiest 1% of households. This effort also made Montana’s overall tax system more regressive. Lower-wage families pay a higher portion of their earnings in state and local taxes (6.1 – 6.3% of income) than highest-income households (4.7% of income).

mbpcsl

The Governor’s budget restores a higher top tax bracket, but it will only apply to those with annual incomes over $500,000 (less than 1% of households). This top tax bracket would be set at 7.9%. The Governor has also proposed scaling back the tax advantages to wealthy investors – by capping the beneficial tax treatment on the first $1 million in annual capital gains income. The budget also proposes to bring about parity on the state deduction for federal taxes paid. Montana is one of only six states that allow taxpayers to take a state deduction for federal taxes paid. This expenditure benefits those who itemize their deductions (primarily higher-income households), and costs the state over $65 million in 2013. The deduction is capped ($5,000 for individual; $10,000 for couple), but that cap doesn’t apply to estates and trusts. This disparity in tax fairness costs the state roughly a million dollars a year. The budget would apply the deduction cap equally.

The Governor has also proposed providing some additional support for Montana’s working families. In Montana, our income tax system makes it even harder for many low-income, working families to provide for their basic needs. Montana begins taxing a two-parent family with two children at a lower annual income than nearly all other states in the country. We begin taxing such a family when their income reaches $13,480 per year (about 55 percent of the federal poverty level). And as mentioned above, when factoring in all state and local taxes, this family is likely paying a higher portion of their wages in taxes than the top 1% of households. To address this inequity and give working families a leg up, Congress created the federal earned income tax credit. Nearly half of states have followed suit by creating a similar state credit. The earned income credit is tied to work – a taxpayer must be working in order receive the credit, and the amount phases down as a family earned more. In 2015, this proposal passed with bipartisan votes in House Taxation Committee and second reading on the House. Nearly 80,000 working families in Montana would benefit from a state earned income credit.

The budget also includes proposal to make corporation income tax fairer and increases to some consumption taxes. Stay tuned for more information on those in blog posts later this month!