A Few Thoughts on the Gubernatorial Debate

I did not get the opportunity to watch the gubernatorial debate in Butte last night, but I did read this summary in the paper this morning. After reading the article, I had a few thoughts. Most are thoughts I've posted before, so I'll provide the links:

1. Business Equipment Tax - This is an area where we have disagreed with the current administration. In 2005, they successfully pushed for elimination of the trigger that was set to phase out the business equipment tax over three years. Had the administration not done that, there would be no business equipment taxes for small businesses, farms, ranches, etc...

Business equipment taxes are essentially taxes on newer, safer, more productive equipment. Is that something we should really discourage? Additionally, the money going towards these taxes could be going towards higher wages for employees and business owners, which means higher income tax collections for the state. While no one likes to pay more taxes, I don't expect anyone will complain if its due to a rise in their net personal income.

Also, Schweitzer told a story about him asking local government officials whether they favored getting rid of the business equipment taxes. Since local government receive money from the tax collections, it shouldn't be a surprise that no hands went up. That's kind of like asking the education community if property taxes should be cut. Our business equipment tax reduction bill in the last session would have provided reimbursements to local governments. The interesting thing is the administration's bill in 2005 provided no reimbursements to local governments. 

2. Overstating Tax Relief - After Schweitzer claimed a third of the budget went to "tax relief" last session, then corrected that figure to more like 25%, the newspapers finally pointed out that just around 10% of the budget surplus went to one-time rebates. Next to nothing went to business to stimulate the economy. Including items such as $78 million of investments in public retirement funds and $21 million in state school funding as "tax relief" is just a slap in the face.

UPDATE: Jay over at LITW has some commentary on this post. I have to do a little rebuttal on some of his points. First he says to give him a call on the day a business owners takes a tax break and turns it over to his employee. Well, Jay, what's your number? The link I provided above (the money going towards these taxes could be going towards higher wages for employees and business owners) gives just one example of a business owner who will create dozens of good-paying jobs due to a reduction in his business equipment taxes. You see, Jay, your perception of business owners being greedy and selfish just does not match up with the Montana business community. Sure there's a few bad apples, but Montana businesses by and large want to pay their employees well and create more good-paying jobs. It's win-win.

Second, Jay's point about a $50,000 exemption has a few problems. First, it's not $50,000 - it's $20,000. Second, it's not a true exemption, it's a threshold. That means that if you have $20,001 in business equipment valuation, you pay on the whole amount. Third, there are hundreds, probably thousands of small and medium-sized businesses that have business equipment values over that threshold. Has he looked at the price of a new piece of farm, timber or construction equipment? Those are small businesses.

His point about where tax relief should go is just a difference of opinion. We believe people AND businesses deserve tax relief. Both businesses and people stimulate the economy.

Comments

[Jay Stevens]

Fair enough that our disagreement is likely ideological. That said, the example of Summit Aeronautics you cite only reinforces my claims that companies aren't likely to use tax cuts to raise wages or hire new employees.

According to Summit A, they're prepared to hire 50 more people now they've gotten a waiver on their equipment tax? Let's assume for a moment that those are workers earning $8/hr...that's $896,000/year for 50 workers...which comes out to the tax rate on $30 million in taxable equipment at the 3% tax rate.

That's assuming low-wage working jobs without benefits...vacation...administrative costs...for those 50 jobs. With all those things added in, we're talking around a quarter-billion dollars' worth of claimed equipment here...

Which seems preposterous to me.

What's more likely is Summit A used the jobs as a weapon in getting the tax waiver. Not that I'm singling the company out: they've got every right to use whatever tool is at their disposal to cut costs. But threatening not to hire, or threatening layoffs, or threatening a move, are all common tactics corporations use to thwart the public will. Seems like the claim that the equipment tax blocked the hire of 50 folks was a tall tale. At least from this vantage point.

[montanamainstreetblog]

Sorry I didn't respond earlier. I've been on the road.

The way I see it, your numbers are pure speculation and hypothetical. You really aren't familiar with the agreement.

What I do understand from your post, your comments here and other writings of yours is that you have a general distrust and sometimes disdain for business. The lack of trust you show seems to go beyond a healthy skepticism of the private sector, and borders on hostility. I obviously don't share that hostility for business.

Our different takes on this situation couldn't be further apart: I believe Summit and the County worked out a great scenario where Summit is creating good-paying jobs for residents of the County for reductions in a tax that discourages growth, discourages businesses to move to Montana, and takes money out of the pockets of employers and employees.

You see this scenario as some kind of con on the part of the business. Just look at the way you characterize the situation with words like "threaten", "tactics" and "twart the public will." Last time I checked, the public wants more good paying jobs in this state.

We will probably continue to disagree on these points, but I happen to believe that the agreement worked out between Summit and the County is a good thing. It's a taste of what we could be doing around the state - creating more good-paying jobs for Montanans.