Montana Main Street Blog

Property Tax Reappraisal Problems for Small Businesses

There is a lot of blame being shifted on the issue of property tax reappraisal figures that may cause many Montana small businesses to pay much more on their property tax bill.

Republican leaders called a press conference yesterday to point out this problem, and speculating that a special session may be needed to fix the problem. Many legislators are placing the blame on the Department of Revenue for getting the estimates to them very late and incorrectly. This has led to reappraisal figures that are higher than the Legislature intended.

The Governor placed the blame squarely on the shoulders of the legislature as a whole:

"People who have unfairly had their taxes raised, of course they can protest it. That will work for some. For others, they should look to find a legislature that is more competent than this last one, and they can fix it in the next legislative session."

Wow. Did he really say that?

Whoever is to blame, it appears the Governor and the Department of Revenue are not too anxious to do anything about it. Even in this bad economy, the Governor doesn't appear all too eager to help our the thousands of small businesses that could be hurt by this mistake. His statements go back and forth between saying "there isn't really a problem" to "if there is a problem, it wasn't my fault and I don't want to do anything about it."

We will continue to look at this situation and see whether it merits a call for a special session. Now is not the time to be over-collecting taxes from Montana's job creators.

SB 503 On the Floor Today

SB 503 (Essmann - Billings) is on the House floor today for 2nd reading. This is a good Montana-based Economic Stimulus Act aimed at attracting new businesses to the state and rewarding small businesses that are long-term partners in the state through increased capital gains tax credits. While other states are raising taxes and fees while cutting government programs, Montana is in a unique position to keep our services growing or stable and (if SB 503 passes) sending a positive signal to businesses and entrepreneurs outside of Montana. SB 503 will be useful in luring businesses to the state to create jobs, help bring in more revenue for the state, and allow Montana to see long-term, sustainable growth.

Lots of Good Bills Moving Out of Senate Committees

Two Senate Committees have voted out a total of four good bills in the past few days. The first two, HB 483 and HB 529 came out of Senate Energy. These bills will go a long way in promoting responsible natural resource development in our state, especially new energy development. This kind of development brings great paying careers for Montanans and millions of dollars in new money for state programs like education.

The second two, HB 490 and SB 503, were voted out of Senate Tax. SB 490 is a business equipment tax relief bill aimed at small businesses. More specifically, the bill would keep the $20,000 threshold, and then lower the 3% tax rate down to 2% for those businesses with less than $5 million in equipment. The business equipment tax is a disincentive for small businesses to upgrade to newer, more productive, safer, and greener equipment. This tax on the tools of production reduces funds that are better used for wages, benefits and growth of Montana small businesses.

SB 503 is a good Montana-based Economic Stimulus Act aimed at attracting new businesses to the state and rewarding small businesses that are long-term partners in the state through capital gains tax credits. While other states are raising taxes & fees and cutting programs, Montana is in a unique position to keep our services growing or stable and (if SB 503 passes) sending a positive signal to businesses and entrepreneurs outside of Montana. SB 503 will be useful in luring businesses to the state to create jobs, help bring in more revenue for the state, and allow Montana to see long-term, sustainable growth.

Income Tax Increase Bill Stalls in Committee

HB 395 (McAlpin - Missoula) is a bill that would raise the top marginal rate for our state income tax. The bill would raise the top marginal rate from 6.9% to 7.9%. When the state decreased the top rate in 2003 from 11% to 6.9%, collections from income taxes increased over 35%! As we told the committee back in February for the hearing, sometimes less is more when it comes to taxation. When you encourage investment and growth through lower, more reasonable tax rates, we see economic development and job creation. If taxes are too high, you punish existing industries and deter others from moving in. Taxes DO matter.

I noticed yesterday that the bill has stalled in the House Taxation Committee on a tie, party-line vote. It probably won't be going anywhere unless someone starts trading votes or making deals. The deadline for revenue bill transmittal is the end of March.

A Montana Economic Stimulus Plan for Small Businesses

Montana is in a unique position in this latest downturn in the economy. Although state revenues have been falling, I believe our final budget will still be larger than the last one even without the stimulus money. We certainly have many industries that are hurting, but it appears Montana still has not experienced the recession to the extent seen in some other states like California, Arizona, Florida, etc... 

This presents our state with some unique opportunities, including the possibility of trying to lure new businesses to Montana. While everyone else is considering actual cuts in services and tax increases, Montana will be increasing services (not as much as some would like), and possibly thinking about tax relief to help bring new businesses to the state to create more jobs and allow the state to collect more money .

Senator Jeff Essmann (Billings) has announced his intention to introduce a capital gain tax incentive bill this session. A good summary of the bill can be found here. In short, Essmann wants to attract new businesses to our state through capital gains tax reductions over the next three years. It would also provide additional incentives to those businesses that keep their assets here longer. So the state will see increased revenues through new, outside investment coming in.

Of course, not everyone is thrilled about giving this kind of tax relief. We look forward to the debate at the Legislature.

Tabled Senate Bills Popping Up in House

The Legislature took a transmittal break last week, but not before member of the House quarreled over a couple of points. One of the arguments centered around a right-to-work bill, which was never scheduled by the Speaker as required by the rules. The explanation he gave was that it was a waste of the House's time to take up a bill that had already been tabled in the Senate. Fair enough.

What's interesting, though is that some House members are looking to introduce tax bills in the House that have already been tabled in the Senate. Take SB 211(Wanzenried) for example - it would supposedly prevent corporations from channeling income to insurance subsidiaries. This bill has failed not once, not twice, but in three other sessions of the Legislature. It was introduced again this session, and tabled by the Senate Taxation Committee.  

Now a member of the House has requested an almost identical bill. Rep. Cohenour has LC1623 to prohibit insurance stuffing by specifying dividends-received deduction. The bill has not been formally introduced yet. If it is, however, it would seem the Speaker's argument against the right-to-work bill would also apply to other bills that have been tabled in the Senate. Should be interesting to see if that is the case.

Big Box Store Tax Tabled

This is a bill (SB 277) that keeps coming back again and again, and it has been tabled again this session. I'm sure it will be back, but it will be another two years before we see it again.

A tax such as this one is essentially a pass-through, hidden sales tax on people who shop at the stores. In addition, it's a sneaky way of getting a new gross receipts tax in Montana by first trying to stick it to the big guys. Eventually, the scope of the law can be expanded to include all businesses. Glad to see that one go away.

Am I a Fool for Paying Taxes?

A lot of people have already posted on this subject, but this latest round of cabinet confirmations got me thinking - are law-abiding, taxpaying Americans fools for actually paying taxes? At least four people (including Caroline Kennedy who was being considered for the New York Senate seat) in just the past month have now had to admit to shorting Uncle Sam on some considerable sums. I start to think if I am the exception rather than the rule when it comes to paying what's owed to Washington, D.C. and Helena.

Business Equipment Tax Relief

Representative Bob Lake has reintroduced his bill from last session to provide business equipment tax relief and the hearing is today. HB 240 would lower the current rate of 3% down to 2%, raise the $20,000 threshold to a $100,000 true exemption (currently, anyone with $20,001 or more pays taxes on the whole amount), and provides local governments with reimbursement for lost revenue.

Much is being discussed at the federal level when it comes to economic stimulus, but you hear very little about what Helena is considering in that department. We believe HB 240 would provide some economic stimulus for Montana businesses and get us one step closer to full elimination of this ridiculous tax.

Think about it - if you're a business owner, you have to consider being penalized with more taxes if you want to invest in newer, safer, more productive and, perhaps, more green equipment. Taxing the tools of production is a horrible idea. In fact, you don't hear about states raising these taxes or deciding to levy them for the first time. Most have moved to reduce or eliminate this tax altogether. 

In the last session, HB 529 received bipartisan support in the House, but died in the Senate Taxation Committee. The Governor has signal his support for a reduction in the business equipment tax, but so far no proposal has come forward. We look forward to working with him and legislators on ideas that will stimulate Montana businesses.

The Montana Chamber will be testifying in support of HB 240 this morning, and I will provide updates on its progress throughout the session.  

Movie Production Tax Incentives Back

I'm sitting here in the House Taxation Committee on a bill that gives tax incentives to movie companies that film in Montana. Many people who traditionally oppose tax incentives for Montana businesses are somehow in favor of this bill. I just spoke in favor of the bill, but mostly to point out that these types of incentives shouldn't be just for Columbia Pictures or Disney.  

We believe this principle should also be applied to all businesses. That includes reducing or eliminating the business equipment tax - a tax on the tools of production that discourages new investment in newer, safer, more productive and more environmentally friendly equipment. Relatively few states in the country have such a tax on business, and the few that do are looking to scrap it altogether.

Tax incentives aren't the only thing that lure businesses, but it definitely helps. If it's good for Hollywood, we should look at more ways to attract all kinds of business to the state.