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Home My WebLink AboutMontana Taxpayer - January 2002MONTANA TAXPAYER MONTANA TAXPAYERS ASSOCIATION HELENA, A Framework for Economic Development The Governor's Office of Economic opportunity has released their framework for economic development for the state of Montana. The plan is the result of a five- month effort by the administration that included meetings with individuals throughout Montana for input on ways to improve the economy. The initial document is meant to serve as the starting point for further discussions on economic development. It is to be used as a "tool" where the goals can be "managed, monitored, and evaluated." The plan is available online at www.state.mt.us. The next step is to obtain additional input on the plan. Dave Gibson, the state's Chief Business Officer will be holding meetings throughout Montana to present the plan and hear feedback. At each meeting there will be a half hour overview by Dave Gibson. Those attending will then be divided into small groups to discuss various issues including: taxes, regulation, energy, education, business technical assistance, state and local infrastructure, capital, work force development, agriculture, and business attraction and clusters. Representatives from the Governor's Office of Economic Opportunity will also be in attendance as well as Kurt Alme, Director of Revenue. We hope each of you has an opportunity to attend one of these meetings. Our association also looks forward to receiving input from you on your ideas on potential tax reform and economic opportunities for Montana Econ. Plan Road Tour Schedule Friday, February I' - Anaconda 8:30 - 11:30 a.m. Location: Anaconda Local Development 118 East 7`h St. Dillon 2:00-5:00 p.m. Location: Rural Education Technology Center (U of MT Western Campus) Wednesday, February 6'" - Miles City 8:30.11:30 a.m. Location: Miles City College Laurel 3:00.6:00 p.m. Location: Laurel Comm. High School Auditorium Tuesday, February 12's- Great Falls 8:30-11:30 a.m. Location: MSU College of Technology Havre 2:30-5:30 p.m. Location: Donaldson Hall MSU Northern Campus Wednesday, February 20`s - Bozeman 8:30-11:30 a.m. Location: Grantree Hotel, 1325 N. 7`s Ave. Wednesday, February 20th - Big Timber - TBA Wednesday, February 27"- Sidney 8:45-11:45 a.m. Location: Elks Club Malta 2:30-5:30 p.m. Location: Malta High School auditorium 8`h St East Thursday, March 7" - Billings 9:00-12:00 a.m. Location: Big Sky Econ. Development Authority 222 North 31Str. Monday, March 1 I' - Butte 9:00-12:00a.m. Location: Wednesday, March 13`" - Joint Reservations held in Helena 1:00-4:00 p.m. Location: Old Supreme Court Capitol Building Friday, March 15" - Missoula 8:00-11:00 am. Location: Boon & Crocker 250 Station Drive Whitefish 4:00-7:00 p.m. Location: Grouse Mountain Lodge Revenue and Transportation Interim Committee The committee will meet in Helena on February 7' beginning at 12:30pm in Room 137 of the Capitol and on February 8a' at 8:30am. The Department of Revenue will be providing an update on POINTS (the department's computer system), status of reappraisal, certification of values to the counties, update on the issues surrounding the new procedures associated with undivided interests, proposed energy tax incentive rules and a new comparison by the department on Montana tax rates in comparison to other states. The committee -1- Montana Taxpayer Address all communications to: MONTANA TAXPAYERS ASSOCIATION P.O. BOX 4909, HELENA, NIT 59604 Telephone (406) 442-2130 FAX (406) 442-1230 Web Site - www.montax.org E-mail - mwhitt0montax.ore phyatt@montax.org Business Office: 506 North Lamborn VVVVVVVVVVIV VVVVVVVVVVVV OFFICERS AND STAFF CHASE T. HIBBARD, Helena.... Chairman, Board of Directors BILL SPILKER, Helena, Vice Chairman, Board of Directors MARY WHITTINGHILL, Helena.... President PAM HYATT, Helena.... Office Manager VVVVVVVVVVVVVdVVVVVVVVV Contractors -John Harp, Kalispell Cooperatives - Jeanne Barnard, Malta Director at Large- Tom Rolfe, Helena Farm Machinery -Gordon Nelsen, Conrad Financial - Craig Anderson, Billings Gas & Electric - Emma Kindt. Bute Grain Growing - Daryl Ayers, Denton Legal Profession - Louise Galt, Helena Motor Carriers- Ken Crippen, Missoula Railroads -Alec Vincent Tawas Real Estate- Bill Spilker, Helena Retail - Marilyn Hudson, Helena Sheep & Wool - Chase Hibbard, Helena Telecommunications - Rick Hays, Helena Timber Products - Doug Mood, Seeley Lake Utilities - Tan Ehzery, Billings non-qualified ag land and hear a report from 'levy Johnson of the Legislative Fiscal Division on states revenue trends. Governor's Agricultural Advisory Committee On February 6d' and 7d' the committee will meet in Helena in Room 160 of the Mitchell Building beginning at 8:30am. The agenda for this month's meeting will mostly center around irrigated and land valuation (appropriate cost and income) but will include discussions on commodity prices, development of the grazing table and determining eligibility for valuation purposes. At the December meeting the committee made the following recommendations: • Retain the current grazing cost percentage (25 percent of the gross grazing income) • Continue use of a 7-year Olympic average for determining commodity prices (highest and lowest values are eliminated leaving five years of data for calculating the arithmetic average. • Retain the 20 percent reduction in alfalfa hay prices due to the dairy influence. • Include the market loss assistance and the agricultural market transition payments to the wheat commodity price for the next appraisal cycle. Exclude crop insurance, loan deficiency, disaster, CRP, EQIP, and grain loan payments from the wheat commodity price calculation. Governor's K-12 Public School Funding Advisory Council The Interim Committee on Education and Local Government met on January Ild' to hear the recommendations of the School Funding Advisory Council. The Governor's Office presented a memo from the Governor to the committee for consideration. The Governor emphasizes in the memo, the "preliminary" character of the Advisory Council's report, but does seem to support a few of the recommendations. She does clarify, that "further work remains to be performed in terms of quantifying the fiscal impacts of the various recommendations put forth by the Advisory Council." Those fiscal impacts should be completed around February 1. Following are some of the recommendations from the advisory committee that have the potential for large mill levy changes and the Governor's response. (See also, December, 2001 - for Montana Taxpayer newsletter for a summary of the recommendations from the report). Create a countywide BASE levy (currently the BASE levy is determined district to district) This recommendation would increase mill levies in high taxable value districts while reducing the number of mill levies in lower taxable value school districts. The Governor states in her memo - "Based on my review, this recommendation appears to hold substantial promise in terms of improving the taxpayer equity side of the school funding situation. While there are a range of possible options here and technical issues that would presumably need to be addressed, I am very interested in seeing this general concept pursued further." Expand county retire levy to include budget authority for health insurance This recommendation would allow districts to increase permissive levies for medical insurance. Governor not in favor of the proposal to allow increases in the permissive levy to fund medical insurance, but in favor of looking into the concept of a statewide insurance pool for school districts. Provide an annual inflator tied to the CPI for the basic entitlement per ANB entitlement and special education funding The Governor has concerns "over the effect that a fixed "inflator" would have on the state's ability to deal with rising/falling revenues and costs in the other areas where it provides necessary and critical services. While I encourage the Interim Committee to engage in further analysis and discussion of this proposal, and to solicit further comment, I do not anticipate being able to unconditionally support this particular recommendation." -2- The Advisory Council will take the recommendations on the road to 9 communities for public input. These meetings do not begin until mid March and will conclude the middle of April. Monday, March 11 -- Shelby Tuesday, March 12 -- Great Falls (on METNET) Wednesday, March 13 -- Lewistown Tuesday, March 19 -- Stevensville Wednesday, March 20 -- Kalispell Tuesday, April 2 -- Miles City Wednesday, April 3 -- Wolf Point Wednesday, April 17 -- Yellowstone Co. Thursday, April 18 - Butte Newest Data Show High-Income Taxpayers Earning and Paying More, Top One Percent Earned Almost a Fifth of the Nation's Income, Paid Over 36 Percent of the Nation's Federal Individual Income Taxes (Compiled from information from Tax Bites, Tax Foundation, data published by the Montana Department of Revenue and compiled by the Montana Taxpayers Association). According to preliminary data released by the Internal Revenue Service, the top-earning one percent of U.S. taxpayers (annual income over $293,415) made 19.5 percent of the income earned in 1999 and paid 36.2 percent of the total federal individual income taxes collected that year. This fraction of the tax burden paid by the top one percent--well over a third of the total--is up from 25.2 percent ten years earlier in tax year 1989. In Montana, the top-eaming one percent of households (incomes over $250,000) made approximately 14 percent of the income earned in 2000 and paid 25 percent of the taxes. (See table 1). Table 1 Federal W... Top Sb=of Tmel AGI Share 0f TOmI Tax. Sere of !.:;All Shire of Toml Tex. 1% 19.5% 36% 1% 14% 2 5% 34% 55.5% 5% 28% 44% Im 44.9% 66.5% 10% 40%. 57% 25% 665% 8365% 20% 56.4% 13% Top 50% B6. r% 96% Tap 50% 85.6% 94.3% a01i0n M 133% 4% Boaam50% 164% 5.7'h At the other end of the income spectrum, the bottom 50 percent of the nation's taxpayers earned only 13.3 percent of all income in 1999, but they paid an even smaller fraction of the federal individual income taxes collected-4.0 percent. Montana shows similar results - the bottom 50 percent of taxpayers earned 14.4 percent of the income and paid 5.7 percent of the taxes. The top five percent of income earners (adjusted gross income over $120,846) and the top 10 percent (adjusted gross income over $87,682) both pay a significantly greater portion of federal individual income taxes than they did a decade ago. In fact, the tax load has since shifted upward so dramatically that whereas a decade earlier in 1989, approximately 55% of all federal income tax collections came from the top 10 percent of income eamers, 1999 data shows that percentage is now paid by just the top five percent. In Montana, the shift is not as significant, but a shift nevertheless. A decade ago the top five percent of income earners (over $45,000) paid 39 percent of the taxes and the top 10 percent (over $35,000) paid 52 percent of the total. In tax year 2000, the top 5 percent paid 44 percent and the top 10 percent paid 57 percent of the total. The federal data come from a forthcoming Tax Foundation Special Report, titled, "Who Pays the Federal Individual Income Tax?" by economist David Hoffman. "Americans at the upper end of the income scale continue to bear an increasing share of the total federal individual income tax burden," observed Hoffman. "Economic growth was still very strong in 1999, and in a progressive tax system like ours, economic growth inevitably results in a steady shifting of the tax burden up the income scale." Table 2 shows the data by income level for both federal and Montana data. Table 2 Federel-F____1 Size of Adjusted Gross Income Number of Returns Total Income Total Tax Amount Thousands Millions % Billions % Billions % $04101 27.4 21.5% $79 1.3% $2 0.2% $10-$20 24.1 18.9% $359 6.1% $15 11% $20-$30 18.4 14.5% $464 7.8% $30 3.4% $30440 13.3 10.5% $462 7.9% $40 4.6% $40$50 9.9 7.8% $442 7.5% $44 5.0% $50475 16.8 13.2% $1,024 17.5% $113 12.9% $75$100 7.8 6.1% $671 11.5% $92 10.5% $100$200 7.1 5.6% $935 16.0% $162 18.5% $2004600 1.9 1.5% $542 9.3% $130 14.8% $50041,000 0.3 0.2% $236 4.0% $67 7.6% $1,000 of more 0.2 0.2% $653 11.1% $182 20.8% Total 127.2 100.0% $5,857 100.0% $877 100.0% Momana Income Bracket Number of Households Total Income Total Tax Thousands Actual % Thousands % Thousands % 0-10 91,446 24.2% 464,321 3.2% 3,188 a6% $10$20 77,723 20.6% 1,147,663 8.0% 16,612 3.2% $20$30 52,426 13.9% 1,293,490 9.0% 27,063 5.2% $30-$40 38,615 10.2% 1,343,736 9.41/6 35,132 6.8% $40450 30,919 8.2% 1,384,853 9.7% 40,611 7.8% $50-$75 49,529 13.1% 3,013,544 21.1% 101,908 19.7% $754100 18,987 5.0% 1,619,976 11.3% 64,376 12.4% $1004200 13,750 3.6% 1,811,943 12.7% 87,568 16.9% $2004500 3,833 1.0% 1,107,987 7.7% 66,429 12.8% $500,000. 914 0.2% 1,118,701 7.8% 75,321 14.5% Total 378,142 100.0% 14,308,216 100.0% 518,208 100.0% -3- EFFECTIVENESS OF STATE TAX AND SPENDING LIMITS Voters in a number of states have passed initiatives limiting taxing and spending, and legislatures have occasionally imposed tax and expenditure limitations (TELs) on themselves. How effective have these measures been in limiting government? Although 26 states currently, operate under some sort of TEL, researcher Michael J. New says it is important to examine them by type. For instance, tax and spending limits passed by initiative are more restrictive and contain fewer loopholes than those enacted by state legislatures. And while some of the TELs enacted by citizen initiative limit government spending to the inflation rate plus population growth, none of those enacted by state law does so. In fact, according to New, other things being equal, state and local expenditures will decrease by $16.29 per capita every year after a state has passed a TEL by citizen initiative. But TELs enacted by state legislatures will actually cause per capita expenditures to increase by $14.00. TELs that limit expenditures to the inflation rate plus population growth reduce per capita state and local direct general expenditures by approximately $114.84. Even if the limits on tax revenues and expenditures are looser -- say tied to the increase in personal income in the state -- New finds that if the TEL requires an immediate refund or rebate of surpluses, it will reduce per capita direct general expenditures by $39.80 annually compared to what it otherwise would be. New says state legislatures generally lack incentives to constrain their own behavior. Thus TELs passed by citizen initiatives are far more likely to contain the sorts of provisions that are going to place effective limits on 13unvi j0 Aiio Source: Michael J. New, "Limiting Government through Direct Democracy: The Case of State Tax and Expenditure Limitations," Cato Policy Analysis No. 420, December 13, 2001, Cato Institute. Ed. Note: The Montana legislature passed legislation in 1981 that attempted to limit the growth in state expenditures to no greater than the percentage growth in total personal income over the past three years (15-8-105 and 15-8-106, MCA). According to Terry Johnson of the Legislative Fiscal Division, the increase in state expenditures has only come close to exceeding this limitation one time since being implemented in 1981. One of the reasons the percentage growth in total income continuously exceeds the percentage growth in expenditures could be due to transfer payments being included in the definition of total personal income. Last session Representative Kasten, District 99, Brockway, introduced legislation similar to the spending limitation passed by the Colorado legislature. The legislation failed to pass. Electronic Distribution of Documents The association is interested in sending more of the information you receive, electronically. If you are interested in receiving the publications electronically, please email Pam at phyatto).montax.org or Mary at mwhitta.montax.ore. Remember, past newsletters are available on our website www.montax.org We also - send notices and updates to members periodically through email. If you are not currently receiving email from our office, please submit the correct address to either Pam or Mary. Oypp-m% In lainel M X09 Qd Jofieyp final do 4.0 ?C( o?\ IILJJdat w r,nia t,0969 IN leualam iIIbd 506b xog •p•d - u.ro4u+e-I 47•?ohi 905 rsl »d AIOII.VIDOSSV SH9AVdXV1 VNVINOW