HomeMy WebLinkAboutMontana Taxpayer Nov. 2000Volume 34 Number 7 November 2000
Annual Meeting - Mark your calendars now!
The 790' Annual Meeting of the Montana Taxpayers will
be held this December 6 in Helena, Montana at
Cavanaughs Colonial Hotel. We have invited as our
luncheon speaker our new Governor, Judy Martz. We
have also invited representatives from the Economic
Action Development Group that was formed after
Senator Baucus' Economic Development Summit. Paul
Polzin and Terry Johnson will be providing an updated
economic and budget forecast for Montana. Ending the
conference will be a panel of legislative tax experts who
will present their views on upcoming tax and economic
issues in the next session. Legislators participating on
the panel will be Senators Jon Ellingson and Fred
Thomas and Representatives Kim Gillan and Bob Story.
Alec Hansen of the Montana League of Cities and
Towns will serve as the moderator. A similar panel
discussion at last year's conference was considered as
one of the highlights of the afternoon.
This year we will be offering reserved tables of 8 to be
purchased for the luncheon. What a great way to include
more members of your firm, family or other associates.
There will be a short reception following the meeting.
Registration forms will be coming soon, or call Pam
Hyatt at (406)442-2130 for details.
Income Tax Simplification and Reform - Tax
Burdens/Federal and Montana
The Income Tax Subcommittee of the Revenue and
Taxation Interim Committee will be meeting again on
November 16 at 10:00 a.m. at the Capitol in Helena to
discuss income tax simplification and reform. At the last
meeting in October, the committee reviewed a variety of
proposals that would reduce the marginal tax rate of 11
to 6.9 percent (by eliminating the ability to deduct
federal taxes), repeal the married filing separately
allowance and increase the retirement exclusion from
$3,600 to $4,700 ($9,400 if married and filing jointly).
In order to maintain revenue neutrality of total income
tax collections, reducing the marginal rate and
eliminating the federal deductibility creates large swings
in winners and losers. In this proposal 114,901 or 32%
of the households would see an increase in taxes, while
49,634 or 14% would experience a decrease in taxes. In
order to decrease the number of losers or shifts among
taxpayers and still reduce the rate to 6.9 percent, the
proposal would cost nearly $17 million. While all
taxpayers by income group would see reduced taxes,
most of this would go to the higher income earners. This
occurs under most proposals for income tax reform
simply due to the distribution of the tax burden.
According to the latest data published by Congress's
Joint Committee on Taxation and information from the
Montana Department of Revenue, (see Table 1, Page 3)
the distribution of the tax burden can be described as
follows:
• Those making more than $200,000 (2.2 percent of
all taxpayers) will pay 42.7 percent of all federal
income taxes this year. In Montana, those making
over $200,000 (1 percent of all households) paid
24.39 percent of Montana income taxes in 1998.
• Those making more than $100,000 (10.2 percent)
will pay 66.7 percent of federal income taxes. In
Montana those making over $100,000 (4.1 percent)
paid 41 percent of Montana taxes in 1998.
• Those making more than $50,000 (34 percent) will
pay 92.43 percent of federal income taxes. In
Montana those making over $50,000 (20.2 percent)
paid 72.53 percent of Montana income taxes in
1998.
In the October/November issue of American Enterprise,
economist Kevin Hassett points out that real growth in
incomes is pushing taxpayers into higher tax brackets.
There are 3.7 percent fewer taxpayers in the 15 percent
bracket now than there were eight years ago. They are
now in the 28 percent bracket and higher. If this trend
continues, the percentage of taxpayers in the 15 percent
bracket will fall from 64.3 percent in 1993 to just 46.6
percent by 2010. Over the next 10 years this real bracket
creep will raise federal taxes by $1.3 trillion, estimates
Hassett.
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Montana Taxpayer
Address all communications to:
MONTANA TAXPAYERS ASSOCIATION
P.O. BOX 4909, HELENA, MT 59604
Telephone(406)442-2130
FAX (406) 442-1230
E-mail - mwhitt@montax.ore
Phyatt@montax.org
Business Office: 506 North Lamborn
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OFFICERS AND STAFF
CHASE T. HIBBARD, Helena.... Chairman, Board of Directors
BILL SPILICER, Helena, Vice Chairman, Board of Directors
MARY WHITTINGHILL, Helena.... President
PAM HYATT, Helena.... Office Manager
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DIRECTORS
Construction- Jerry Hamlin, Helena Legal Profession- William Stamhagen, Helena
Contractors - John Harp, Kalispell Mining- Ras Ritter, Helena
cooperatives- Jeanne Bamerd, Malta Motor carriers- Ken chipper, Missoula
Director at Large- Tom Rolfe, Helena Railmads-Alec Vmcent Taras
Fan Machinery -Gordon Nelsen, Comad Real Estate - Bill Spilker, Helena
Financial- Craig Anderson, Billings Retail- Marlyn Hudson, Helena
Gas & Eleclro - Emie Kmdl, Butte Sheep & Wool - Chase Hibbard, Helena
Grain Growing- Daryl Ayers, Denton Tdasommunications- Barbara Rent, Helena
Hardware Stores-Tam Taylor. Colstro Timber Products- Dow Mood, Seeley Lake
Post Elections
Congratulations to all newly elected officials statewide
and welcome back to the incumbents. We are anxious to
begin working with the new administration and
legislative body on the issues that are important to our
rile5iiucrn. -
Over the past month, I have been traveling with Webb
Brown of the Montana Chamber to over 13 cities across
the state. One message has been clear: Montanans need
to work together on nonpartisan comprehensive tax
reform. As part of the tour, we have been asking all
participants to fill out a survey on various economic and
taxation issues. The response has been helpful in
understanding what issues are important to Montanans.
Since taxation will certainly play a major role in the next
session, we will be sending out surveys to all our
members this month. Your input and ideas are important
to our association. We'll publish the results prior to the
session.
MBA Meetings for November
We will be holding more meetings for the Montana
Business Agenda tour in November. The following
dates have been scheduled:
Tuesday, November 21
Hamilton - Noon - at the Exchange
Missoula - 4:00 - at the Chamber
Tuesday, November 28
Belgrade & Bozeman - Noon - at the Belgrade Chamber
Livingston - 5:00 p.m. - to be announced
We hope that you can join us!
Revenue Estimates for the 2001 Legislature
The Revenue and Taxation Committee is responsible for
adopting, the revenue estimates that will be used by the
57d' Legislature. The committee will meet on November
16 at 1:00pm and November 17 at 8:00am in Room 172
of the Capitol to hear preliminary revenue estimates
from the Legislative Division as well as the Department
of Revenue.
At the October meeting, the committee heard economic
forecasts from the national, Montana and agricultural
perspective. These estimates play a large part in
determining the trends for inflation and interest rates to
be used in the revenue estimates. Mike Donnelly,
WEFA Group, presented a national economic forecast
for a variety of areas. WEFA predicts inflation will drop
from about 3.3 percent this year to 2.5 percent next year.
Increases in energy prices accounted in large part for the
current. inflation rate. Real gross domestic product
(GDP) will remain high in 2001 at 5.3 percent before
moderating to 3.6 percent in 2001 (GDP was 4.2 percent
in 1999). Most of the productivity gains came from
manufacturing (just in time inventory and
computerization of manufacturing). To continue this
growth, intereet productivity would have to make up
huge productivity gains which is not expected.
Interest rates are expected to increase again over the
same time period with Federal Funds going from 5.5.
percent in 19010, to 6.5 percent in 2000 and 6.75 percent
in 2001. Thirty year T Bonds would rise to 6 percent in
2000 and 6.60 percent in 2001, up from 5.5 in 1999.
Although labor markets are tight and unemployment is
low, employment growth is expected to taper off. Both
the national and world economies appear healthy.
Donnelly indicated some of the risks in his overall
forecast were the oil forecasts, a major stock correction
and the 10 percent chance of a mild recession.
Paul Polzin, Director of UM's Bureau of Business and
Economic Research, told the Committee that Montana's
economny grew faster than expected in the 1990's, with
the construction industry (especially highway
construction) leading the way. Productivity gains in the
natural resource industry also fueled the growth in Gross
State Product (GSP). He expects the state's economy to
grow by 2 percent to 2.5 percent in real terms over the
next few years. That is down form the growth rate of
previous years. He also expects capital gains to slow
and a slight slowing of nonfarm income, somewhat due
to nontraditional forms of compensation becoming more
popular.
Myles Watts, Chair of the Department of Agricultural
Economics of Montana State University, presented a
cautiously optimistic assessment of the estate's
agricultural sector. Dr. Watts stated that since
agriculture represents the largest basic industry in the
state, it is important to be concerned about its future.
(Continued from Page 2, Column 2)
Historically, cattle and wheat and barley represent about
85 percent of the market receipts, with cattle
representing about 42 percent and wheat and barley
representing about 42 percent. This past year saw
producers slightly switching to cattle (up to about 47
percent) since prices were up and wheat prices were
down. Next year, this should even back out due to larger
federal payments to compensate for the lower wheat
prices and disaster aid for drought. This should help
boost income tax receipts although it is difficult to say
what year the payments will be included as income.
Phil Brooks, economist with the Montana Department of
Labor and Industry, discussed recent employment trends
and the outlook for the future, According to Brooks,
nonagricultural employment in Montana should grow
annually by about 1.6 percent over the next several years
compared with a 1.3 percent annual growth rate in the
us.
(Excerpts from the November Interim - Revenue & Taxation by Jqf Marun)
Federal
TABLE 1
Adjusted Gross
Income 2000 Numlerof Betums Income Individual Income Tae
Millions % Billlare % Billions %
Las. then $10,000- 19.8 14.1% 1.1% _„ -$5 .31.6%
$10-$19,999 218 16.9% $356 4.8% -$7 -0.8%
$20-$29,000 19.5 13.9% $485 6.5% $10 1.1%
$30-$39,000 16.2 115% $565 7.6% $30 3.4%
$40-&19,999 114 9.5% $584 7.9% $39 4.4%
$50-$74,999 21.6 154% $1,313 17.7% $114 12.9%
$75-$99,999 11.9 6.5% $1,027 13.8% $113 12.8%
$100-$199,999 112 8.0% $1,460 19.7% $213 24.1%
over$200,000 3.1 2.2% $1,554 20.8% $377 42.6%
Toul all taxpayers 140.5 100.0% $7,428 1000% $884 100.0%
Highest 10% 14.0 10.0% $2,982 40.1% $587 66.4%
Highest5% 7.0 5.0% $2,176 29.3% $478 54.1%
Highesll% L4 1.0% $1,146 154% $297 33.6%
Highest 20%-$50,00 72,649 20.0% $7,051,722 55.8% $325,080 72.3%
Highest l0%-$]0,00 36,324 10.0% 84.921,329 39.0% $252,285 56.1%
Highe515%-$90,000 18,898 5.2% 83,568,865 28.3% $199,920 44.4%
Highest 1%-$200,00 3,666 1.0% $1,702,618 135% $103,695 244%
TO INCREASE TAXES ON THE RICH,
CUT THEIR TAX RATES
The three times personal income tax rates were slashed
in the 20th century, it was predicted that the federal
government would lose revenues and the affluent would
benefit. But instead, each time, federal revenues
increased after tax rates were cut, especially taxes paid
by the top 1 percent of taxpayers.
First, the Harding-Coolidge tax rate reductions brought
the top income tax rate down in stages, from the war-
time high of 73 percent in 1921 to 25 percent in 1925.
Between 1923 and 1928, real tax collections
nearly doubled as the economy surged.
The share of taxes paid by those earning over
$50,000 (the rich back then) rose from 44 percent in
1921 to 78 percent in 1925.
Second, John F. Kennedy's tax cuts out the top tax rate
from 91 percent to 70 percent.
Income tax collections rose by more than 50
percent from 1963 to 1968.
And the share of taxes paid by Americans
earning over $50,000 per year (equivalent to almost
$200,000 today) increased from 12 percent in 1963 to
almost 15 percent in 1966.
Third, in 1981, Ronald Reagan's 30 percent across-the-
board tax rate reduction reduced the top rate from 70
percent to 28 percent.
From 1980 through 1990, federal tax receipts
doubled -- growing an average of 7 percent per year.
The top 1 percent paid 17.6 percent of all taxes
in 1981, but paid 27.5 percent in 1988 when the rate
hit its low.
And by the way, the Reagan tax cuts "soaked" the super-
rich, the top 0.1 percent of income earners, whose share
of income taxes paid doubled from 7 percent to 14
percent.
Source. Arthur B. Laffer and Stephen Moore, "To Soak
the Rich, Cut Their Tax Rates, " Wall Street Journal,
October 24, 2000.
A fine is a tax for doing wrong.
A tax is a fine for doing well.
Author unkown
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Local Government Funding & Structure Committee
A public hearing will be held in various locations in the
state through MetNet on November 15. The hearing will
be from 11:00 a.m. to 1:00 p.m. (locations listed below).
At the conclusion of the public hearing, the committee
will meet at the Capitol in Room 152 to address
additional public concerns and answer questions. At
3:00 p.m., they will conclude with a work session to
review the public comments and make final decisions on
the proposals. All the materials are available on the
Department of Revenue's web site at:
http://www.state.mt.us/revenue/Local_gov/Public-Heiring_2000/
The committee is considering numerous proposals
regarding local government funding (including a local
option sales tax and realty transfer tax) and structure. A
summary of the proposals of the committee was outlined
in the Montana Taxpayer September issue. If you need
an extra copy, let us know.
METNET Sites
Local Government Funding and Structure
Committee
Public Hearing - November 15
November 150'- 11:00 - 1:00
Department of Public Health & Human Services
Lower Level Auditorium
111 Sanders Street - Helena
Contact: Jim Cervelli at 444-1832
Montana Tech
ELCB, Room 231
1300 West Part Street - Butte
Contact: Sonja Taffelmeyer at 496-2993
Western Montana College of the UOM
Library, Montana Room, 2"d Floor
710 South Atlantic - Dillon
Contact: Denise Rust at 683-7542
METNET Sites (continued)
Montana State University - Northern
Hagener Science Center, Room 202
300 11 " Street West -Havre
Contact: Wanda McKinney at 265-3702
Great Falls College of Technology of MSU
Room B-103
2100 16th Avenue So. - Great Falls
Contact: Heather Scott at 771-4388
Miles Community College
Room 106
2715 Dickenson Street - Miles City
Contact:
Flathead Valley Community College
Learning Resource Center, Room 120
777 Grandview Drive - Kalispell
Contact: Malinda Crawford at 756-3828
Montana State University at Billings
Special Ed. Bldg, Room 159
1500 N 30th Street - Billings
Contact: Rob Massee at 657-1696
University of Montana
Gallagher Building, Room 104
Corner of Arthur and Eddy - Missoula
Contact: Joan Richards at 243-6519
Montana State University
Burns Center, Room 126
EPS Building, So. 7th and Grant - Bozeman
Contact: Nadeen Comfort at 944-6553