Bullock vetoes tax simplification bill

Senate Bill 171, sponsored by Sen. Bruce Tutvedt, R-Kalispell, called for revamping the state’s individual taxes, eliminating several tax credits and expanding two others.

If enacted, SB 171 would have cost the state treasury about $50 million over four years in reduced income tax revenues, including $28 million during the first two years.

“Simplification is a laudable goal, but unfortunately SB 171 raises more issues than it resolves,” Bullock wrote in his veto message on May 4. “At a cost of close to $30 million over the next two years, SB 171 will have a significant negative effect on balancing our budget and maintaining a sound ending fund balance.”

Bullock said SB 171 would have raised income taxes for 17 percent or 75,000 of Montana income taxpayers. He said it would have sunset three widely used tax credits, the Energy Conservation Credit, the Geothermal Heating System and the Alternative Energy System Credit, which encourage homeowners to reduce their reliance on fossil fuel and help them meet air quality standards.

The elimination of these tax credits, which are dollar-for-dollar reductions in tax liability, was partially justified by a promise to replace these credits with a grant program in the next legislative session.

“This promise, however, is dependent upon the future legislative action that may not come to pass,” Bullock said.

Tutvedt, who heads the Senate Taxation Committee, responded by noting that the tax would have helped working Montanans.

“I’m hurt that the governor chose not to provide a tax cut for working Montanans,” he said. “It contains a relatively small tax cut. It simplifies Montana’s complicated income tax system, closes loopholes and lowers taxes and rates for most Montanans. In fact, most Montanans would have been able to file their taxes on one page.”

The nearly $30 million in tax cuts over two years that would have been provided by SB 171 are equivalent to 10 percent of the total new tax revenues forecast for the state over the next two years, Tutvedt said. With the legislature’s failure to pass a major infrastructure bill, “there’s definitely room for tax cuts in the budget,” he said.

Bullock vetoed an income tax simplification bill sponsored by Tutvedt during the last legislative session. The governor also vetoed two bills that would have cut income taxes, House Bill 166, sponsored by House Majority Leader Keith Regier, R-Kalispell, and SB 200, sponsored by Sen. Duane Ankney, R-Colstrip.

Glenn Oppel, the government relations director for the Montana Chamber of Commerce, expressed his displeasure in the veto.

“It’s just plain old disappointing, given that we have biennium after biennium of surpluses here, it just amazes us that there was no interest in moving a significant tax relief moving forward,” he said.

Oppel said the income tax simplification was something that Tutvedt, the Montana Society of CPAs, Montana Taxpayers Association and Montana Chamber of Commerce have been working on for four years.

“We thought there was maybe a glimmer of hope because the infrastructure bill didn’t make it through,” he said.

SB 171 would have reduced the number of state income tax brackets from seven, with tax rates ranging from 1 percent to 6.9 percent, to two with two rates, 4.7 percent and 6.1 percent.

It also would have required taxpayers to use the same filing status they use on their federal returns and replaced the current 2 percent capital gains credit with a 1.5 percent rate reduction for net capital gains.

Tutvedt said SB 171 would have been a signature piece of legislation in the session if Bullock had signed it. But Bullock disagreed.

“Montana’s system of income taxation is generally recognized as stable, progressive and fair,” Bullock said. “Montana’s tax system also receives high marks for being fair and business friendly when compared with other states. And while it certainly can be improved, we need to ensure that changes minimize any harm. In my view that standard is not met by SB 171.”

For the second straight legislative session, Gov. Steve Bullock has vetoed a bill aimed at simplifying Montana’s individual taxes.

Senate Bill 171, sponsored by Sen. Bruce Tutvedt, R-Kalispell, called for revamping the state’s individual taxes, eliminating several tax credits and expanding two others.

If enacted, SB 171 would have cost the state treasury about $50 million over four years in reduced income tax revenues, including $28 million during the first two years.

“Simplification is a laudable goal, but unfortunately SB 171 raises more issues than it resolves,” Bullock wrote in his veto message on May 4. “At a cost of close to $30 million over the next two years, SB 171 will have a significant negative effect on balancing our budget and maintaining a sound ending fund balance.”

Bullock said SB 171 would have raised income taxes for 17 percent or 75,000 of Montana income taxpayers. He said it would have sunset three widely used tax credits, the Energy Conservation Credit, the Geothermal Heating System and the Alternative Energy System Credit, which encourage homeowners to reduce their reliance on fossil fuel and help them meet air quality standards.

The elimination of these tax credits, which are dollar-for-dollar reductions in tax liability, was partially justified by a promise to replace these credits with a grant program in the next legislative session.

“This promise, however, is dependent upon the future legislative action that may not come to pass,” Bullock said.

Tutvedt, who heads the Senate Taxation Committee, responded by noting that the tax would have helped working Montanans.

“I’m hurt that the governor chose not to provide a tax cut for working Montanans,” he said. “It contains a relatively small tax cut. It simplifies Montana’s complicated income tax system, closes loopholes and lowers taxes and rates for most Montanans. In fact, most Montanans would have been able to file their taxes on one page.”

The nearly $30 million in tax cuts over two years that would have been provided by SB 171 are equivalent to 10 percent of the total new tax revenues forecast for the state over the next two years, Tutvedt said. With the legislature’s failure to pass a major infrastructure bill, “there’s definitely room for tax cuts in the budget,” he said.

Bullock vetoed an income tax simplification bill sponsored by Tutvedt during the last legislative session. The governor also vetoed two bills that would have cut income taxes, House Bill 166, sponsored by House Majority Leader Keith Regier, R-Kalispell, and SB 200, sponsored by Sen. Duane Ankney, R-Colstrip.

Glenn Oppel, the government relations director for the Montana Chamber of Commerce, expressed his displeasure in the veto.

“It’s just plain old disappointing, given that we have biennium after biennium of surpluses here, it just amazes us that there was no interest in moving a significant tax relief moving forward,” he said.

Oppel said the income tax simplification was something that Tutvedt, the Montana Society of CPAs, Montana Taxpayers Association and Montana Chamber of Commerce have been working on for four years.

“We thought there was maybe a glimmer of hope because the infrastructure bill didn’t make it through,” he said.

SB 171 would have reduced the number of state income tax brackets from seven, with tax rates ranging from 1 percent to 6.9 percent, to two with two rates, 4.7 percent and 6.1 percent.

It also would have required taxpayers to use the same filing status they use on their federal returns and replaced the current 2 percent capital gains credit with a 1.5 percent rate reduction for net capital gains.

Tutvedt said SB 171 would have been a signature piece of legislation in the session if Bullock had signed it. But Bullock disagreed.

“Montana’s system of income taxation is generally recognized as stable, progressive and fair,” Bullock said. “Montana’s tax system also receives high marks for being fair and business friendly when compared with other states. And while it certainly can be improved, we need to ensure that changes minimize any harm. In my view that standard is not met by SB 171.”