Lingering Possibilities

By Bob Decker
March 17, 2009

It’s too soon in the Montana Legislature to define the stakes of the budgetary end game, but enough time and votes have passed to identify what progressive taxing or spending ideas still have life in them.

The Senate Tax Committee tabled Sen. Kaufmann’s bill to establish an earned income tax credit (EITC) for Montana, but the House Tax Committee passed the EITC bill of Rep. Mary Caferro on the strength of concurring votes from three Republicans, who joined the 10 Democrats on the evenly split committee. Though it is likely that a couple of those three Republicans may have voted for the bill simply to provide cover for perhaps one Republican who does support it, the bill stands a fair chance of passing in the House and going to the Senate.

In the realm of property taxation, progressives are striving to improve the lot of low-income property owners through a strengthened system of “circuit breakers,” i.e., limitations on property tax obligation determined by the ratio of income to property tax owed. This concept still has a pulse in the Select Committee on Reappraisal, which is weighing different options for dealing with the results of the Department of Revenue’s recently completed six-year property tax reappraisal process.

Because the EITC involves reduced taxes for low-income workers, it has a price tag - approximately $28 million for Rep. Caferro's bill to create a credit equal to 20% of the federal earned income credit. And because any expanded circuit breaker in the property tax system would increase taxes for more wealthy property owners, it, along with the EITC, will have to be squeezed into a state budget for which estimated revenues are dropping regularly and for which there is no majority support for increased taxation.

The budget situation is threatening not just to progressive tax ideas, but to regressive ones as well. For example, several bills propose to continue a 20-year pattern of reducing business equipment property taxes, and though reducing the equipment tax is a policy devoutly wished for by Republicans and supported in more modest fashion by Gov. Schweitzer, the estimated cost of implementing a reduction nears $50 million annually. That's a hole that would have to be filled either by a new source of revenue or further reductions in state spending.

As the remaining weeks of the sixty-first session unfold, keep your eyes on revenue estimates, the passage of appropriations bills, and leaks of end-game policy-trading packages.