The 61st Legislature faced the unenviable challenge of balancing the budget during a time of economic downturn and extreme revenue uncertainty.  Despite a large influx of federal recovery act funding, some of the decisions made by the legislature may lead to cuts in vital programs like education and healthcare, either now or in the future. Many of the cuts are slated for the 2013 Biennium (July 1, 2011 to June 30, 2013) and need not occur if the 62nd Legislature is willing to fill holes created by decisions of the 61st Legislature.

House Bill 395 (2009) attempted to restore some of the state revenue lost as a result of SB 407 (2003). SB 407 provided a variety of tax cuts to Montanans, but the highest-income Montanans have received most of the benefits from those cuts,  and the costs to the state were far higher than anticipated. HB 395 would restore some of the revenue lost as a result of SB 407 by creating a new top tax bracket on households earning more than $250,000 per year.  HB 395 would also restore some of the progressivity of the Montana income tax system and affect less than 1% of all Montanans.

During times of economic downturn and revenue uncertainty, any proposals for decreasing revenue (i.e. cutting taxes) must be carefully scrutinized. One of the only new tax cuts being seriously considered during the 2009 Legislative Session is a reduction in the business equipment tax. The effective tax rate on business equipment has already been reduced dramatically over the last decade; further decreases during an economic downturn will mean decreased revenue to the state and reduced funding for other spending priorities or tax cuts that could have a greater impact on both average Montana families and the economy.

The $787 billion American Recovery and Reinvestment Act of 2009 (ARRA) provides many funding opportunities for tribal governments. Some of these opportunities are contained in Montana’s House Bill 645, the state appropriation of federal stimulus dollars.This brief outlines some of the funding opportunities for tribal governments in HB 645. It also outlines significant funding sources in ARRA that may be allocated directly from the federal government to Montana tribes, primarily through grant applications.

The Montana Budget and Policy Center addresses some common misconceptions surrounding appropriate use of stimulus dollars during the recession.

Senate Bill 407, passed in 2003, lowered the top tax rate for the personal income tax and created a credit for capital gains, effectively lowering the capital gains rate. At the time, proponents argued that these changes would spur economic growth in Montana. However, there is no evidence that SB 407 created additional growth in Montana’s economy.

Ending preferential treatment for capital gains income will offer fiscal security for Montana while restoring some of the progressivity of the Montana income tax system. Furthermore, extensive research shows that there is little connection between lower taxes on capital gains and higher economic growth, either in the short run or the long run.

The American Recovery and Reinvestment Act of 2009 provides extensive relief to states, local governments, and individuals suffering from the current economic downturn. This brief outlines general principles to consider when allocating the funds, and provides information on the core components of the act with the greatest potential for providing relief to low- and moderate-income Montanans.

The Montana Department of Revenue is completing the most recent reappraisal of property values in the state. Based on the most current estimates provided by the Department, the appraisals are likely to result in a statewide average increase of approximately 56% in residential home values and 51% in commercial property. The Governor and leadership of both parties have expressed a commitment to keeping property tax revenue neutral as a result of the reappraisals and to mitigate the effects of increased property values on taxpayers. Efforts should be taken to ensure that any proposed property tax mitigation is targeted effectively towards those individuals and families least able to pay increased property taxes, namely those who pay an unduly high share of their income in property taxes.

A state Earned Income Tax Credit would help Montana's working families, who are struggling to make ends meet despite their hard work. Economic trends have made it harder for working families to live above the poverty line. Montana currently has over 16,000 families that are working but still live in poverty. The current economic crisis will only increase the struggles for these low-income families. Unfortunately, Montana’s income tax system drives many poor working families deeper into poverty. A state EITC would help ameliorate this effect on low-income taxpayers.