- Associated Press - Friday, February 13, 2015

HELENA, Mont. (AP) - State senators on Friday heard the first of two Republican representatives’ plans to lower income taxes.

Republican Rep. Keith Regier introduced in the Senate Taxation Committee a measure to permanently cut income taxes in every bracket by 0.1 percent. The Kalispell representative said he would support an amendment to House Bill 166 suggested by supportive peers to increase the cut to 0.2 percent.

“The state of Montana can afford a tenth of a percent or two-tenths of a percent tax reduction,” Regier said, referring to the state’s more than $300 million budget surplus. “It’s time that the workers of this state receive a tax break.”

Republican Rep. Art Wittich has proposed lowering individual state income tax liability by 2.5 percent in 2015 and 2016 and creating a non-refundable credit of up to $100 for property tax on a primary residence. House Bill 169 has not been scheduled for a Senate hearing.

Both tax reductions passed out of the House of Representatives on party-line votes last Thursday.

Senate Bill 200, which would permanently cut income taxes by 0.1 percent to 0.2 percent, passed a party-line vote in the Senate Friday. The proposal by Republican Sen. Duane Ankney of Colstrip would also widen Montana tax brackets and reduce the capital-gains credit rate.

Regier said cuts to the income tax rate were proven to stimulate the economy after the legislature implemented a 10 percent decrease a decade ago. That income-tax cut was coupled with sales-tax increases, which are not a part of Regier or Wittich’s proposals.

Lowering income taxes by 0.1 percent across the board would decrease state revenue by $39.5 million during the next two years, according to a fiscal note attached to the bill. It would save taxpayers about $20 million every year after 2017.

“This bill does not get rid of the surplus,” Regier said. “It only takes part of it.”

Wittich’s proposal would save taxpayers a total of $77.5 million, and Ankney’s about $55 million annually according to fiscal notes.

Sen. Sue Malek, a Democrat from Missoula, said decreasing income taxes without offsetting the cost in some way would have adverse effects. Local government costs continue to rise at the same time the population of retired citizens who subsequently don’t pay income taxes is growing, she said.

“I don’t know what reasons expenses are going up for municipalities,” Regier said. “I just know that if you leave money in people’s pockets, they’re going to spend it - and that stimulates the economy.”

Heather O’Loughlin, research director at the Montana Budget and Policy Center, opposed the bill. Across-the-board tax cuts would favor the wealthy and have little impact on people earning low and middle-level incomes, she said.

The Institute for Taxation and Economic Policy, a non-partisan organization that works on federal, state and local tax policy, ran the numbers on HB 166, O’Loughlin said. The institute’s analysis found that someone earning more than $450,000 a year would save $600 annually under the proposal, whereas someone making $28,000 would save $8.

“Even that dollar purchase of a candy bar in the store keeps the candy company going,” Regier said. He later added: “If you invest in a company, people can be hired for jobs, and it works out well for everybody.”

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