Governor seeks historic tax cuts; middle-class relief gains support
Micah Drew
(Daily Montanan) Gov. Greg Gianforte made another public pronouncement last week that his administration would deliver the largest tax cut in Montana history — to the tune of $850 million, according to his office.
But opponents to the governor’s plans to cut income taxes say the the approach would disproportionately benefit the state’s wealthiest earners, while low- and middle-income Montanans would see just double-digit cuts.
“We’re here today because we believe in a simple truth– you know how to spend your money better than the government does,” Gianforte said during a rally on the steps of the Montana Capitol on March 28. “Every day you wake up, you go to work. You provide for yourself and for your family. You budget carefully and you save where you can. But too often, when you get a paycheck, you look at it and you wonder, ‘Where did it go?’ We know the answer — taxes.”
Earlier that day, the governor’s preferred plan to cut taxes received its first hearing before the Legislature.
Carried by Sen. Josh Kassmier, R-Fort Benton, Senate Bill 323 would lower the top income tax rate — paid by Montanans earning more than $21,000 as single filers — from 5.9% to 5.4% in 2026 and down to 4.9% in 2027. The bill also cuts the long-term capital gains tax from 4.1% to 3.9% and expands the Earned Income Tax Credit from 10% to 15%.
Montana currently has two income tax brackets — one at 4.7% and one at 5.9% — which split at roughly $21,000 for an individual filer or $41,000 for married filers. The state used to have a six-bracket marginal tax system until 2021.
Calling it the “third installment” of the governor’s long-term plan to get to a single, flat tax rate for the state, Mark Blasdel, director of the Governor’s Office of Economic Development and former Senate President, pointed out Montana has the highest tax rate of mountain region states. However, many of the states surrounding Montana also have a statewide sales tax.
“Montana is also currently the 17th highest tax rate in the nation. So we believe this is an incredible opportunity to bring this down another 1%,” Blasdel told the Senate Taxation Committee. “We think this is a great way to continue that downward trend of the collection of taxes. It makes it so that we continue to be able to put pressure so that the budget does not continue to grow at a higher grade than inflation, and it continues to keep more money in the pockets of hard working Montanans.”
But opponents decried the across-the-board cutting of the top tax bracket, saying it doesn’t offer meaningful relief to middle-income earners.
An analysis by the Montana Budget and Policy Center indicates that the wealthiest 1% of Montanans would see roughly $10,000 in tax breaks under the policy, while individuals making $50,000 or less would receive less than $100.
“The problem with structuring an income tax reform in this way … is that for every dollar you have, you get that cut. So if you have a lot of dollars, a huge bucket of dollars, you get that cut on every single dollar in that bucket,” Rose Bender, Director of Research for the Budget and Policy Center, told the committee. “And if you just have a couple dollars you get that cut on just those couple dollars. So it’s really impossible to reform income tax in this way while not disproportionately benefiting the wealthy.”
But Kassmier pushed back and said that giving Montanans their money back, no matter how much, was a goal that everyone should want to get behind.
“These income tax dollars are the people’s dollars. We have an opportunity here in the session to give our the people’s money back, and if it’s only going to give somebody $50 back or $100 back, I’m telling you that that means a lot to the people that are out there working,” Kassmier said.
At previous press conferences, Gianforte has said his plan is the only comprehensive plan that addresses all income levels, with the expansion of the earned income tax credit helping out the lowest earners.
In addition, the reduction in capital gains tax rate was lauded by supporters of the bill as helping farmers and ranchers.
“A lot of people think of (capital gains) as just stocks and bonds and those types of things that would come into play here, but for farmers and ranchers, capital gains comes into play on sale of property and also on certain livestock and equipment sales,” said Nicole Rolf, with the Montana Farm Bureau Federation.
SB 323 was also supported by Montana Taxpayers Association, the Montana Stockgrowers Association, and the Montana Chamber of Commerce. The Montana Federation of Public Employees, Montana Nonprofit Association and a former Democratic legislator, Margie McDonald, spoke against the bill.
The governor on Friday said that while there are several proposals aimed at reforming incomes taxes, his plan is the “only fool-proof conservative plan.”
“Cut. The. Rate,” Gianforte said.
A competing proposal, sold as a “middle-class millenium” bill, passed the Senate with support from all but three Senators on Monday.
Sen. Mike Yakawich, R-Billings, carried Senate Bill 203 with support from both majority and minority leadership as cosponsors.
Rather than cut the top tax bracket rate, SB 203 would expand the lower bracket to comprise individuals making up to $100,000 — covering up to the 90th percentile of earners, according to Yakawich. For married couples filing jointly the bracket delineation would be at $200,000.
The bill “provides income tax relief for thousands of middle-class Montanans by expanding the number of people eligible for the state’s lower (4.7%) tax rate,” Yakawich said. “This bill is tailored to the middle-class Montana taxpayers.”
Yakawich used his five millennial-aged children as examples — they have good jobs and families, but still struggle to make ends meet with rising costs of living in Montana.
“It’s that middle 60 to 90 percentile. We really want to love them up. We want to thank them,” he said. “That money that they save … might help them come back into the community, come back into our state.”
SB 203 also changes the long-term capital gains tax, against expanding the eligibility for the lowest tax rate to an individual’s first $100,000, from the current $20,500.
The measure passed the Senate 47-3 and will next be heard by the Senate Finance and Claims Committee.
“Residents across the state repeatedly told us that tax relief is a top priority for them,” Senate President Matt Regier said in a statement following the vote. “SB 203 is a historic step to limit government and help all Montana income tax payers prosper.”