Montana Main Street Blog

Federal Attempts to "Create Jobs"

Over the next ten months Congress and the President will be debating budgets, bills, tax revisions and more to supposedly "create jobs." Thomas Oliver of the Atlanta Journal-Constitution has a great article about the difficulties in this line of thinking. The federal government can make all the new tax credits it wants, but that is not going to create jobs.

I don't know who originally coined the axiom, "First, do no harm," but that is what the government needs to do in order to get us even close to thinking about an economic recovery. As Congress debates and the President presses for sweeping changes in health care, climate change (cap & trade), card check, different tax rates for investors, different rates for income tax payers, death tax revisions, huge financial and banking reforms, and record deficit spending, my question is this - who would want the risk of hiring new people in a time of record uncertainty? And not just economic uncertainty, but uncertainty largely created by government officials and regulators.

It's not an easy time to be a business owner right now, especially a small business owner. I think most are thinking they are safer just treading water than trying to expand, and it's due in large part to many things being debated in Congress right now. If we want to get our people back to work, we must first understand what's been keeping businesses from hiring new people. Tax credits aren't going to get people back to work in any large numbers.

4-1 Vote in Favor of Otter Creek

After a few hours of public testimony regarding the Otter Creek coal tracts in eastern Montana, the Land Board decided to go ahead with putting the tracts up for bid. The vote was 4-1 in favor, with Denise Juneau being the lone dissenter.

A couple of thing struck me as odd - the first one being that the state's Superintendent of Public Instruction (the head of the K-12 system in Montana) voted down an opportunity to bring in hundreds of millions of dollars in new money for our schools. I've never hear a superintendent say they have enough money, but maybe she's going to make that case in the 2011 Legislature. There won't be a big surplus to start with, so schools are going to have to deal with less coming their way unless they think that Montanans should pay higher taxes.

The other part of the vote that was interesting was the minimum bid amount required. It's set at 25 cents a ton, which is two and a half times more than the market price set by the Arch Coal and Great Northern Properties agreement. Some have speculated this was the Land Board's way of killing the project without a "no" vote. That may be a bit cynical. There are 45 days for a company to bid, so we'll see if there are any takers. If there aren't the Land Board should come back with a more reasonable price.

Either way, kudos to the Governor, State Auditor, Secretary of State and Attorney General for agreeing with the vast majority of Montanans by at least voting in favor of putting the tracts up for bid.

New Poll Out on Montanans' Views of Economy, Business and Elections

 

Poll Shows Pulse of Montana Voters

Respondents Give Answers on Economic, Political and Business Issues

The Power Base (P-Base) is an annual scientific poll of 600 Montana voters on a variety of business and political issues with a margin of error of 4.1%. The poll is commissioned by the Montana Chamber of Commerce and other business groups to determine what regular Montanans think about important economic issues facing our state. Here are some of the results:

Economic Development

The unemployment levels are a top concern for Montanans. 40% listed it as the top problem facing our state, and the next highest problem, health care, was a third of that level at 15%. Montanans want to get back to work, and they are looking for businesses, not government, to provide the jobs.

As in prior surveys, the P-base shows Montanans want to see more business growth, especially in high wage businesses like the natural resource industries. For example, 78% of Montana voters want the state to encourage more timber harvesting, 76% want more oil & gas development, 71% want more coal development and 70% want more mining. Almost two-thirds of Montanans say the state Land Board should go forward with the Otter Creek coal tracts leasing as well, which is an issue the Board will take up at its December 21^st meeting.

“The message from the survey is clear: Montanans want to see the state move towards long-term, sustainable growth by increasing natural resource development, improving our business climate, and creating more good-paying jobs,” said Jon Bennion, Government Relations Director for the Montana Chamber.”

Montanans are still pessimistic about the national economy. 53% of voters believe the U.S.’s economy is on the wrong track as opposed to 24% who think we are on the right track. Voters believe the state’s economy is better off with 41% saying we’re on the right track versus 34% saying wrong track. 

Health Care

Respondents in the poll expressed significant satisfaction levels with their own health care insurance. Almost three-quarters of those polled (74%) said they were satisfied, while only 15% said they were dissatisfied. Half of Montanans want Washington, D.C. to scrap the current health care proposals and draft new legislation that would address rising costs.

Concerns of Voters

The P-base is also a good opportunity to see what financial concerns are on the minds of voters. For the fourth straight year, health care costs continue to be a top concern at 24% and high taxes came in second at 18%. Additionally, addressing the unemployment situation is the top issue (18%) voters want addressed in the coming elections, and health care (17%) is a not-so-distant second concern of voters at 15%. 59% said government in general is getting too involved and spending too much money, while only 31% said government wasn’t doing enough on issues like education, health care and the environment. 

Elections

When it comes to candidate endorsements, voters respect candidates who get stamps of approval from business groups, like chambers of commerce, agriculture groups and more.

When asked whether a Montana Chamber endorsement of a candidate would influence their voter, 51% of voters said it would have a positive effect compared with only 16% who said it would have a negative effect (35% net postitive). Even more popular are agriculture groups with 68% positive to only 7% negative (61% net positive). Trial lawyers (-40% net negative), environmental groups (-18% net negative) and labor unions (-9% net negative) scored low in the poll.

When asked about the upcoming elections for the Montana state legislature, voters are more likely (46%) to want to replace their local legislator rather than re-elect them (34%). Additionally, Republicans have a slight edge going into the legislative elections. 32% prefer GOP candidates for the legislature while 25% prefer Democrats.

“Candidates for the legislature need to focus on the economy, jobs, and growing the business sector,” explained Bennion, “Voters are worried about how much the government is trying to do, so candidates need to offer solutions that center around responsible development of our natural resources, controlling government deficits, and free enterprise.”

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.