HomeMy WebLinkAboutMontana Taxpayer
Volume 34 Number 8 December 2000
We want to hear from you!
The 57a' Legislature begins January 3 in Helena. Already
there are nearly 1,300 bill draft requests that have been
submitted. We are interested in your views and want
your input. A short survey is included with this month's
issue. We hope you will take the time to fill out and
return to it to us (you can also complete the survey
online at www.montax.org). We will publish the results
of the survey in next month's newsletter.
79th Annual Meeting
Over 120 people attended the 79n' annual meeting of the
Montana Taxpayers Association on December 6. The
members unanimously approved the board of directors
for the coming year (listed on page 2).
Economic Development for Montana
Lieutenant-Elect Karl Ohs reiterated the new
administration's commitment to economic development.
He told the audience Montana needs to focus our efforts
if we are truly going to make headway in improving the
economy in Montana. The administration plans on
leading economic development efforts from the
Governor's office to help ensure this focus. Tom Scott,
CEO of First Interstate Bank and chair of the Senator
Baucus' task force, Economic Development Action
Group (EDGA) summarized their activities over the past
few months, including tribal issues, continued strong
education in Montana and providing new and existing
businesses in Montana an infrastructure of information
to assist in expansion, retention and relocation.
Chairman Chase Hibbard led off the conference by
emphasizing the associations' commitment toward
balancing advocacy and providing education on general
tax applications. The Montana Taxpayers Association
continues to be a reliable source for tax information for
all taxpayers and the legislative body in Montana.
Governor-Elect Judy Martz listed her top concerns as
economic development, education and competitive
taxation for all taxpayers and businesses in Montana.
She explained economic development means helping
businesses of all sizes create jobs, support for existing
businesses and attracting more businesses to the state.
She wants to make sure businesses know "Montana is
open for business." The new Governor-Elect also
indicated her support of reducing income taxes on the
poorest Montanans, providing tax credits to new or
expanding high-tech businesses and exploring if any
potential exists to look at tax reform outside the current
big four: property, individual and corporation income
and natural resources. She indicated she has no plans to
introduce a general sales tax but one would be
acceptable if another tax such as income taxes were
eliminated.
Economic, Financial, and Budget Outlook
A panel of speakers addressed the economy, financial
outlook and the perspective of the state budget by the
new administration. Paul PoWn, presented an overview
of Montana's general economic outlook. He estimates a
2 percent to 2.5 percent growth for Montana for 2001,
down from the estimated growth of 3.5 percent for 2000
(see a related article on Montana's economy in the
November `Montana Taxpayer' newsletter). He also
presented a twenty-year comparison of per capita income
in Montana. Montana's per capita income has been
declining for the past 20 years. As shown in the figures
below, this is true for many of the western states.
Rank Cha nge in Rank
1980 1990 1999 80-90 80-99 90-99
Montana 34 45 47 -11 -13 -2
Idaho 37 42 41 -5 -4 1
Wyoming 7 33 32 -26 -25 1
Colorado 14 19 7 -5 7 12
New Mexico 40 47 49 -7 -9 -2
Arizona 30 36 36 -6 -6 0
Utah 45 48 42 -3 3 6
Nevada 6 13 12 -7 -6 1
ote: ontana s per capita ranking i increase rom 49"
1997 to 47" in 1999).
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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 - mwlutt@inontax.org
RhyattOmontax.org
Business Office: 506 North Lamborn
d d ty N N N N N N N N N N N d N !?/ N N C? N N N
OFFICERS AND STAFF
CHASE T. HIBBARD, Helena.... Chairman, Board of Directors
BILL SPILKER, Helena, Vice Chairman, Board of Directors
MARY WHITIINGHILL, Helena.... President
PAM HYATT, Helena.... Office Manager
d d d d d <1 V V N V N b V V V V d V Y d d d d
DIRECTORS
Contractors-John Harp.KalispNl Mining- Russ Filter, Helena
Cooperatives- Jeanne Bamard,Malla Motor Carriers - Ken Crppen, Missoula
Director at Large-Tom Rolfe, Helena
ei Railmada- Alec Vincent. Texas
rad
Farm Machinery - Gordon Nelsen Real Estate- Bill Spiker. Helena
Financial- Craig Anderson, Billings Retail- Marlyn Hudson, Helena
Gas&Electric - Ernie Vindt Butte Sheep &Wool - Chase Hibbard, Helena
Grain Growing- Daryl Ayers. Denton Telecommunications- Barbara Renf, Helena
Hardware Stores -Terry Taylor, Colstrip Timber Products - Doug Mood, Seeley Lake
presented an overview of the state's revenue picture.
Where does the money come from?
All Funds - For the 2001 biennium total sta te revenues
of $5,025 million were derived from the fo llowing
cnrtrrec:
Millions % of Total
Federal Revenues $2,167 43%
State General Fund $2,068 41%
State Special Revenue $ 784 16%
All Other $ 6 0.1%
Total $5,025
State General Fund - In the 200 1 biennium, the state
general fund of $2,068 million (or 41% of total state
revenue) is broken down as foll ows:
Millions % of Total
Individual Income Tax $ 972 43.7%
Property Tax
(state portion only) $ 371 16.7%
Corporation Tax $ 161 7.2%
Investment Earning $ 196 8.8%
Natural Resources Taxes $ 74 3.3%
Insurance Premiums $ 75 3.4%
All Other $ 375 16.8%
Total $2,224
Where does the money go?
Total General Fund
Millions % of Total
Public Schools $ 961 46.5%
Higher Education $ 243 11.7%
Corrections $ 180 8.7%
Human Services $ 463 22.4%
All Other $ 221 10.7%
Total $2,068
What are the projections for the 2003 Biennium?
Based on the most current estimates, the state's general
fund balance would be $27.1 million. This balance
assumes no change in present law expenditures, no
change in statutory appropriations or new proposals or
legislation.
Next, Chuck Swysgood, Budget Director for Governor-
Elect Martz tied the financial picture together by
indicating the new administration will not rely on
revenue enhancers to balance the budget. He indicated
his office is scrutinizing all new proposals by the state
agencies and that they intend to stay within the current
budget.
Legislative Panel
Concluding the afternoon, a panel of four legislators
each had seven minutes to give their perspective on the
upcoming legislative session. Senator Jon Ellingson,
member of Senate Tax, questioned the benefits of
reductions in the business equipment tax to help spur
economic development. He was concerned that tax cuts
will not create sufficient new jobs and that tax cuts at
both the state and federal level encourage purchases of
imports and products manufactured in other states.
Majority Leader, Senator Fred Thomas predicted the
next legislature will hold the line on business tax
equipment reductions, making sure lie triggers put ill
place for further reductions beginning in tax year 2004
stay intact. Any money available for tax relief would
first be targeted to homeowners. He thought there might
be some reform in income taxes through reductions in
the marginal rate (to be offset by eliminating federal
deductibility) but the legislature will probably not be in a
position to provide overall tax cuts.
Minority Leader, Representative Kim Gillan relayed her
concerns regarding state agencies' budgets. She stated
that citizens are not so concerned about the dollars being
spent, but if they are being spent efficiently. She
questioned whether the proposals on income tax reform
would benefit an average family and wants to be careful
about reforming income tax for perception and not
providing actual relief or reform.
Representative Bob Story, Chairman of House Tax, was
also supportive of the reductions in business equipment
from the last session. He pointed out that property tax
relief was also provided for residential and commercial
ruai property both in the 1999 Session as well as the
May 2000 Special Session by using additional revenues
from the income tax. He wants to make sure that if
income tax revenues begin to decline, there is not a shift
back to property taxes.
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How Montana Compares - 1997 Bureau of the
Census Data
Doug Young, Professor from MSU has compiled the
most recent comparisons from the Bureau of the Census
on local and state taxes. Although per capita income
information is available for 1999, state and local tax
comparisons are only recently available for 1997. The
comparison data will be included in the "Montana
Taxation" booklet and in an abbreviated brochure "How
Does Montana Compare." Both publications are ready
and should be mailed within the next two weeks.
Dr. Young made the following observations on the
comparisons between FY1996 and FY1997. Total 1997
State & Local taxes in Montana per capita rose $170,
which was about the national average increase. Thus,
Montana's rank of 43rd is not much different than the
1996 figures. Total S&L taxes declined as a percentage
of income - from 11.1% to 10.9%. However, taxes
declined even faster as a percentage of income in other
states, resulting in Montana's rank increasing from 29th
to 16th.
Per capita income went from 47 h to 49 h. This pattern -
little change in the per capita rankings but an increase in
the ranking based on percentage of income - stems in
large part from slower growth in income in Montana in
comparison with the rest of the country from 1996 to
1997 (Montana's growth was 4.7% v. 6.1% nationally.)
Also, there are a lot of states crowded around the
average values, so a relatively small change in
percentage of income can lead to a large change in
ranking. Montana's per capita income ranking faired
better in 1999, placing the state once again at 47 h.
Montana's growth rate from 1998 to 1999 increased
5.1 % which was slightly higher than the nation's growth
rate of 4.8%.
As of FY1997, Montana remains a high tax state as
measured by property taxes (per capita and percent of
income). However, the data does not reflect the major
property tax reform from the 1999 Legislative Session.
Mill Levy Increases
Despite property tax relief provided to taxpayers in the
last session, recent figures released by the Montana
Department of Revenue reflect mill levies have
increased statewide from an average of 404.62 to 431.20,
over a six percent increase from the prior year. While
some of the increases can be attributed to voter approved
levies, a portion of that is attributable to a provision in
law that allows local governments to "float" their mills
to generate the same level of revenue levied in the prior
year. Our association is concerned that this current
provision in law discourages fiscal responsibility by
actually promoting levying mills to the maximum level
each year. Proposals to alleviate this problem will be
considered this session.
Taxation Without Representation
Christmas came early to the taxpayers of Billings in the
form of a secret Santa named Clayton Fiscus. The local
realtor led an effort to collect signatures to put to a vote
of the local citizens a city ordinance that would add a 4%
tax to users of public right-of-way.
The petition effort was a success with 7,988 signatures
certified as of Thursday, December 14. There will be a
public vote on the question next November. Although
the signature gatherers faced a short time frame and
extremely poor weather conditions, 15,000 taxpayers
signed the petition in just 25 days with 8,922 signing in
the first seven days.
The city council has 60 days to decide whether to
rescind, hold in abeyance or proceed with the tax.
Recent communications coming from the city manager's
office indicates the city plans to proceed with collecting
the tax even though the voters in Billings will decide
next fall whether they want this type of taxation. City
Manager Dennis Taylor stated that proceeding with the
collection of the tax would clarify "how much is added
to their customers' bills because of the fees and how
much utility and phone bills increase for uunpiofn
entities that pay no local property taxes."
Ultimately, this tax falls squarely on the shoulders of
consumers of electric, natural gas and
telecommunication services. Consumers can estimate
how much the tax will add each month to their utility
bills by adding 4% to the total of their electric, natural
gas and telephone bills. These costs could be more
depending on any surcharge the local providers add for
the administrative cost of collecting the tax for the city.
Check Out Our New Web Site
We now have a web site where you can review past
newsletters, contact us directly by email and utilize our
links page: www.montax.org The survey included in
this newsletter can be filled out on the site.
New Subscriber Memberships Available to
Individual Taxpayers
The board of directors has decided to offer a new
"newsletter only" subscription membership for
taxpayers. They believe this will provide an opportunity
for more Montanans to join MonTax and obtain
information on taxation activities in Montana.
Individual taxpayers can join for $20 per year and will
receive the `Montana Taxpayer' newsletter as well as
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have the opportunity to provide input to the association
on taxation matters in Montana.
If you received a copy of this newsletter and are not
currently a member of the Montana Taxpayers
Association, you can obtain more information on
membership benefits and register online -
www.montax.org
WHY CUT TAXES NOW?
President-elect Bush is apparently sticking with his plan
for a projected $1.3 trillion tax cut over 10 years. There
are a number of reasons to cut taxes, say observers.
1. Taxes are too high.
• Last year, federal tax revenue as a percentage of the
economy reached a historic peak - 20.4 percent of gross
domestic product.
•An increasing chunk of that revenue is coming from
federal income taxes, which rose to 9.9 percent of GDP
last year from 7.8 percent in 1994.
*In 1997, according to the most recent data available,
the average federal income tax rate on all taxable returns
was 15.3 percent - the highest level since the mid-1980s.
2. Marginal rates are too high.
•They have climbed from the original Reagan tax
program's percentages of 15-28-33 percent to the
Clinton tax hikes of 15-28-31-36-39.6 percent.
*Real bracket creep-what happens as wages and
salaries increase with economic' and productivity
growth-has pushed people who aren't "the wealthy"
into higher brackets.
*The tax rates people actually pay are higher because
the 1990 tax bill disallowed deductions and phased-out
exemptions; as a consequence, revenue has grown faster
than national income for the past eight years.
3. Economic growth is slowing.
*Oil prices were $10 to $20 a barrel two years ago;
they have been around $30 a barrel for nine months.
•Natural gas prices have almost quadrupled since last
year.
•Consumer debt is at its highest level in 20 years.
Finally, Congress has spent the surplus created by tax
overpayments the past two years. And nondefense,
discretionary spending will soar almost 13 Dercent this
fiscal year, according to Stephen Slivinski of the Cato
Institute.
Source: Editorial, "The Bush Tax Cut," Wall Street Journal,
December 19, 2000
We would like to congratulate, Barbara Ranf who serves
on our Board of Directors. She has been appointed by
Governor-Elect Judy Martz to be the Director for the
Department ofAdministration.
The Montana Taxpayers Association would like to
extend to everyone a VERY MERRY CHRISTMAS
AND A HAPPY NEW YEAR!!
Mary Wkilling4ill, Prelident & am Jdyalt, 0111ce Manager
MONTANA TAXPAYERS ASSOCIATION
Please take a few moments to fill out this general survey. Your answers will help us identify your ideas and concerns
regarding the economy as well as taxation policy
ABOUT YOU
Are you a Montana Taxpayers Association member? .......................................................................Y / N
? Business
Type of Business:
Size of Business:
?Less than 10 FTEs ?10 - 20 FTEs ?20 - 50 FTEs ?More than 50 FTEs
? Individual Taxpayer
? Government Representative
Population of residence: ? Rural/Ag ? under 1,000 ? 1,000-4,999 ? 5,000-20,000 ?More than 20,000
Business Equipment Tax Reform
Legislation passed during the 1999 Legislative Session provided important property tax relief for businesses and taxpayers
in Montana. The impacts to Montanans as a result of this legislation will be difficult to quantify. For example, SB200
reduced the tax rate for business equipment from 6% to 3% and livestock.tax from 4% to 0% over the next four years. We
would like to determine the effects of the legislation and need your input.
What do you plan to do with tax savings you will receive as a result of tax reform from the 1999 Legislative Session?
I plan to purchase additional equipment or (livestock): ..................................................................... Y/ N
I plan to hire more employees: .................................................................................................... Y/ N
................. .
I plan to increase employee wages: ............................................. .............................Y / N
I plan to improve my business? bottom line: .................. ......... ................................................ .... Y/ N
Other:
What is the estimated tax savings for your company as a. result of the reduction in the business equipment
tax rate? $
Proposed Tax Reform
There have been recent discussions on the need for comprehensive tax reform and the possibility of various options on
sales taxes. Currently, there are proposals for both a statewide as well as local option sales taxes.
Statewide sales taxes- (administered and collected by a central agency. Revenues could be earmarked or used
for both state and local government and schools).
Would you support a statewide sales tax if the revenues were used
reduce property tax ................................................:....... .....................................................Y / N
reduce income tax ......................................................... .............. Y / N
.......................................
eliminate property tax ............................................... ...... .................... .................................. Y / N
eliminate income tax ............ ........................................... ..................................................... Y / N
Would you support a statewide luxury/tourist tax if the revenues were used to reduce or eliminate property tax and/or
............................................................................ . .... . . .. .. . . .. . .. ... . . . . ... . ...
income tax? ............... Y / N
Local Option Sales Taxes - (administered and collected by local agencies. Revenues are typically used soley for
local purposes, but some proposals have revenue sharing for jurisdictions not in large trade centers).
Would you support local option resort/luxury/tourist tax to fund local government operations? .................. Y / N
Would you support a local realty transfer tax to fund local operations? ...................... ................ ......... Y / N
There are legislative proposals for income tax simplification and reform during the special or next legislative session. One
of the proposals would reduce marginal tax rates and base Montana taxes on federal taxable income (removes federal
deductibility and the availability of married filing separately).
What are your general comments on income tax
OTHER
Economic development, encouraging businesses to remain and relocate to Montana, ensuring a competitive tax structure,
school funding, higher education are just some of the top priorities mentioned by lawmakers and the new administration.
What steps do you think Montana should take to achieve these priorities?
Do you have any other legislative or administrative priorities or concerns?
COMMENTS
Any other comments are welcome.
Optional: ? I would like to receive more information on joining the Montana Taxpayers Association.
Name:
City:
Zip:
Telephone: E-mail Address
Please return to Montana Taxpayers Association, P.O. Box 4909, Helena, MT 59604