The truth behind why income taxes are up in Montana

Rose Bender, Lee Enterprises, 07/09/26

Tax dollars enable Montanans to work together for things we cannot achieve alone, like a quality education for our children, the development and maintenance of infrastructure, and public safety and health. Over the last 6 years, Montana lawmakers have cut income taxes four times, and these cuts have disproportionately benefited the wealthiest.

Each session, the Legislature has chipped away at the top income tax rate, from 6.9 percent to 5.4 percent. Those cuts have wiped out more than $500 million in state revenue each year, and they largely go to the wealthiest. Four-fifths of the benefit from these tax cuts passed since 2021 went to the wealthiest 20 percent. The wealthiest one percent is receiving annual tax cuts of over $25,000 on average (enough to buy a car or put a down payment on a house), while those around the median are receiving, on average, just $60.

And yet, Montana’s income taxes have been high during that same period. Why is that? Montana tax revenues have benefited from federal stimulus, in-migration, and stock market growth. Pandemic-era federal stimulus boosted state revenues. And the share of income from sources of wealth has grown. Montana’s population is aging, receiving more retirement income, and becoming wealthier, with strong income growth from investments. Across the nation, states are also seeing income tax increases from stock market growth. These factors have helped boost income tax revenue, but federal stimulus is temporary, and the stock market is volatile.

As we all know, economies ebb and flow. What goes up must come down. And we’ve learned this lesson before. The most notable lesson of recent history comes from Kansas and began in 2011-2012. Following the lead of then-Governor Sam Brownback, the Kansas legislature cut the income tax by almost 30 percent and the tax rate on certain businesses to nothing. Brownback predicted economic growth and job creation but got just the opposite. Following those cuts, Kansas underperformed most neighboring states and the nation in economic activity. Revenues plummeted, leading to cuts in education and vital services and to a downgrade of the state’s bond rating. As a result, in 2017, Kansas raised income tax rates back to their starting level and repealed the business profits exemption.

But Kansas isn’t the only state with this story. In the decade following the great recession of 2008, 18 states cut their personal and/or corporate income tax rates. These cuts were followed by sharp increases in public college tuition, cuts in school funding, and a weakening of income supports like unemployment insurance, which contributed to a slower economic recovery. And prior to that, during the economic growth from 1994 to 2001, some states cut income tax rates, only to see revenues plummet and budget cuts follow during the subsequent recession.

Montana lawmakers must learn from history and be wary of using these high, temporary revenues to make long-term cuts to the tax base. The wealthiest Montanans are already receiving the bulk of the more than $500 million in income tax cuts given away each year. That is enough.  Let’s hope our leaders are grounded in reality as well.

Rose oversees Montana Budget & Policy Center's research team to study and advance economic policies that equitably invest in communities. Her research focus is state fiscal policy, advocating for a fair tax code that supports a robust state budget so Montana is a better place to live and work for everyone. Previously, she worked at the Montana Department of Revenue, serving as an economist/tax policy analyst, estimating impacts to state revenues and researching policy issues.  She holds master's and bachelor's degrees in economics from the University of Montana. Rose grew up in Billings. She lives in Helena with her husband and two children.