Goal: Fund state government and schools at a sustainable level, progressive as practical with numerous circuit breakers to assure fairness. Build a system that is resistant to recession and recognizes current economic trends.
Weaknesses in current system:
- Income tax is bracketed so that the max entry is a low income level. The system fails to recognize lower middle class income earners from high income earners. The maximum is 6.9% , about the average nationwide.
- The system has a 2% discount for capital gains.
- Corporate income allows carry backs that may attribute to volatility.
- Property taxes fail to account for irrational appraisals and the impact on working age residents.
- The system fails to significantly address the school bonding impacts of low taxable value districts and impacts on property taxes of more vulnerable owners.
- Taxes on electronic sales are not collectable.
- Select sales taxes capitalizing upon tourism with circuit breakers for reimbursement to residents do not exist at the state level.
- Resort taxes are restricted to towns below 5,500 impacted by tourism
- The Coal Trust Fund is restricted to earnings that are overly restrictive.
- Decrease unfunded liabilities in PERS and TRS retirement systems
Modernizing the system:
I will likely support components of the Interim Revenue Committee tax study. I worked with Chairman Redfield of the House Tax Committee on the language of the study and promoted it’s passage. Can a sales tax be fair? Some legislators believe a consumption tax is the most equitable form of taxation. I don’t agree with that BUT with the inclusion of smart circuit breakers and such a tax limited to non-essentials and a sales cap to protect large ticket necessities; such a method can assist lower income Montanan’s. A substantial amount of the proceeds must assist flattening the regressive curve. Revenues should fund a bracketed earned income tax credit for lower income wage earners, a property tax reduction through the funding of a circuit breaker that refunds some taxes paid to property and dwelling owners who’s income is disproportional from their tax burden and consideration to a renters dividend for applicable Montanan’s.
The so called Amazon Tax recognizes that large out of state entities should have some skin in the game in generating income for Montana government and schools.
Cap gains should be reviewed as part of the Interim Revenue Committee’s scheduled tax credit review process. Consideration should be made for carve-outs for one time discounts for family businesses or property.
The state should consider funding the 80% base budget of public schools and the six mil levy for universities. This allows for increased property tax reduction with funds from a sales and income tax.
The Coal Trust Fund should be diversified to include additional sources of energy and or irreplaceable minerals in anticipation of the possible demise of coal mining. The earnings from the Trust should look to the New Mexico Trust for guidance in higher risk (but not risky?) investment strategies. This may require a constitutional change.
The legislature should pass a study bill to better understand the implications of two large pension systems currently funded at a 71% level. The system should be sustainable without dependency on legislative cash infusions. The committee should look at investment rates and the amortization schedules to assure a sound system for future generations of eligible state and school and university employees.
Your comments are welcome!