Montana’s proposed income tax cut, heralded as the largest in state history by Governor Greg Gianforte, has sparked debate over its impact on various income groups. The proposal aims to reduce the tax rate from 5.9% to 4.9%, offering different benefits across income levels. While those earning less than $26,700 might see modest savings of around $39, individuals with salaries exceeding $749,001 could enjoy a reduction of $9,577.
According to the Governor’s Office, the budget includes an increase in the earned income tax credit to support lower- and middle-income Montanans. However, the plan also faces criticism. Democratic Rep. Mary Caferro claims that 75% of the tax cut benefits will go to 20% of Montanans, leaving the middle class with minimal gains. “Their tax cuts will be about two tanks of gas,” Caferro noted.
Republican Sen. Greg Hertz argues that states without income taxes are more business-friendly. He highlighted the current imbalance in Montana’s tax system, where the top 10% of earners pay 58% of the taxes, while the bottom 50% contribute only 6%. The Montana Budget and Policy Center analysis projects the rate reduction cost at $255 million annually, significantly outpacing the cost of the earned income tax credit expansion.
Governor Gianforte’s spokesperson, Kaitlin Price, emphasized that the $850 million in permanent tax relief is designed to benefit all Montanans. Yet, Heather O’Loughlin from the Montana Budget and Policy Center voiced concerns about the fiscal implications, stating the cuts favor wealthy households and could affect future budget investments.
Senator Hertz supports the income tax cut concept but stresses the need to balance it with state service funding. He noted past legislation, like Senate Bill 399, which helped low-income earners by matching federal standard deductions. Hertz believes Montana needs to enhance its competitiveness in attracting business investments, especially within the Rocky Mountain region.
Income tax report
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