Finis

By Bob Decker
April 29, 2009

“Sine die” means “without day,” but because direct Latin-English translations are frequently awkward and unrevealing, a more applicable definition for the term is “without any future date being designated.”

The latter meaning is what “sine die” holds in a legislative context, as in, “We’re adjourned, we’re leaving, and, barring a special session made necessary by either our blunder or the imposition of fate, we won’t be back for two years.”

To all but the most blindingly sunny of dispositions that may reside within any of the legion of legislators, lobbyists, support staff, reporters, and political junkies who participate in Montana’s ninety-day legislative sessions, “sine die” also conveys a sense of gratitude, as in “Thank you for not one more day of this.”

If fewer people were repressed by the idea that the use of foreign phrases reveals a weak commitment to the exceptionalism of our mother tongue, or more people discovered the dead-on suitability and conversational uplift that the world’s bon mots can provide, “Sine die” would be the preferred spoken expression of fond and final parting between the diverse players in Montana’s biennial exercise of democratic lawmaking. Hugs, handshakes, regrets, relief … “Sine die!”

The question of pronunciation is a barrier to such usage, as an internet search will give you sigh na dah´ yee, sin ay dee´ ay, and sign ee die´ ee. For people who sought or hoped for significant progressive changes to Montana’s tax structure, the preferred pronunciation might be so nee´ dee, or “so needy,” for the aftertaste of a session that did almost nothing to improve Montana’s tax system and a few things to worsen it.

Property Tax Reappraisal

This was the sole major tax issue that played a part in the legislative finale, not because its resolution would significantly alter the terms of the budgetary endgame that defined the end of the session, but because property reappraisal had been a central focus of attention for most of the session, because several proposals had been tardily introduced to address it, and because of a universal legislative law that requires a long-discussed topic to have a long-delayed denouement (seeking conversational uplift here).

HB 658 was the vehicle for property reappraisal, but because almost all principals (House, Senate, Dems, GOP, Governor) agreed from the get-go that the final property tax policy would be “revenue-neutral,” i.e., not raise property tax revenue from 2008 levels, the outcome of the bill did not have a significant impact on state revenue numbers.

Reappraisal of property values (for houses, commercial buildings, agricultural and forest lands, power plants and pipelines, etc.) has been a weighty topic in this session because reappraisal occurs only once every six years (this question of frequency has been a part of the session’s dialogue), and a reappraisal has just been completed. Montana’s growth boom of recent years has driven property values, especially for residences, dramatically upward, which created apprehension in people about parallel increases in property taxation.

To complicate matters, the current economic crisis could unfold to lower residential market values (although a statewide trend toward lower market values has not yet been identified in Montana).

During the session, The Policy Institute supported the incorporation of a “general circuit breaker” into Montana’s property tax system. A circuit breaker limits property tax liability to a percentage of annual income, an approach that lessens property tax payments for low-income homeowners and elevates payments for the wealthy (as circuit-breaker policy is structured by most states). Montana already has four constituency-specific circuit breakers in place, including one for low-income seniors and one for disabled veterans, but a “general” circuit breaker would simultaneously replace or revise those specific models and create a formula that assisted more low-income property owners.

The idea for a general circuit breaker generated substantial discussion during the session, but was ultimately rejected by Senate Republicans, who opposed the shift of tax responsibility from low-income to high-income taxpayers of the circuit breaker approach.

Income Tax

Of several introduced bills related to Montana’s income tax system, the most significant ones addressed the impacts of SB 407, a comprehensive income tax bill passed in 2003. SB 407 shifted state income tax responsibility in Montana from the wealthy to low-income taxpayers by flattening marginal tax rates and lowering rates on capital gains.

The Policy Institute supported a bill by Rep. Dave McAlpin (D-Missoula) to create a new top marginal tax rate of 7.9%, above the current maximum rate of 6.9%. McAlpin’s bill failed in the House Tax Committee on a tie vote.

The Policy Institute opposed a bill by Rep. Tom McGillvray (R-Billings) to increase income tax deductions, a change that would have resulted in disproportionate benefit to high-income taxpayers as well as a state revenue reduction of $20 million annually. McGillvray’s bill died on a tie vote in the House Tax Committee.

Capital Gains

As explained above, Montana’s tax rate on capital gains was lowered by 2% in the 2003 session. The Policy Institute supported a bill by Sen. Ron Erickson (D-Missoula) to repeal that tax break, but the bill died in the Senate Tax Committee.

The Policy Institute opposed a bill by Sen. Jeff Essmann (R-Billings) to further decrease Montana’s tax rate on capital gains for the sale of certain businesses created within Montana in the next several years. Essmann’s bill, passed by the Senate in mid-session, was passed by the House in the waning days of the session.

Earned Income Tax Credit

This tax idea (“EITC”), which provides an income tax credit to working taxpayers in low-income families, is widely recognized as the most effective anti-poverty policy in the nation. First initiated at the federal level, during the administration of President Ford, the EITC has since become an element of tax policy in 25 states. Before and during the session, The Policy Institute worked with a coalition of church, low-income, and senior organizations to establish an EITC for Montana.

Sen. Christine Kaufmann (D-Helena) introduced an EITC bill in the Senate, which was tabled by the Senate Tax Committee. Rep. Mary Caferro (D-Helena) introduced an EITC bill in the House, which was approved by the House Tax Committee and subsequently by the full House. The bill then was tabled on a tie, partisan vote in the House Appropriation Committee, where Republicans opposed adding a new reduction in state revenue to the budget (the annual cost of a state EITC in Montana would have ranged from $5 million to $20 million, depending on the percentage credit adopted). Caferro’s bill also failed on the House floor on a “blast” motion.

Business Equipment Tax

This element of Montana’s property tax system has been under siege since 1989, when the state’s tax rate on business equipment was, on average, 11%. The rate has been successively lowered and today operates at 3%.

Several bills were introduced by Republicans in this session to reduce the tax further, but the bills’ price tags, varying from $20 million to $50 million annually, depending on the size of the tax-cutting blade applied, prevented the Tax Committee on the House side from passing any of the bills, including a version adopted by the Senate.

The Policy Institute opposed further reductions in the business equipment tax, largely on the argument that Montana’s tax climate for business is currently judged to be quite favorable by various national economic, tax, and business development organizations that perform state-by-state comparisons. (For example, Montana’s business tax climate is rated the sixth most business-friendly in the nation by the Tax Foundation, which produces what may be the most comprehensive analysis of state business taxes.)

Tax Compliance

This category includes a handful of bills that attempted to close some of the loopholes that allow certain taxpayers, including individuals, partnerships, and corporations, to avoid full payment of state taxes. The loopholes related to such topics as insurance company structures, off-shore tax havens, and non-resident sales of real estate.

All but the most innocuous of the compliance bills failed, mostly on the argument from Republicans that either the targeted problem was not a serious one or the Department of Revenue already had sufficient authority and resources to address the alleged problem.

This arena of tax legislation was frustrating in the session because the proposed changes rested not on philosophical positions about the level of taxation or the distribution of tax responsibility, but on the seemingly sensible and simple argument that Montana’s existing tax requirements should apply equally to all taxpayers who are eligible for a particular tax. “Sensible” is a subjective concept, however, and little in the legislative world is simple.

Oil and Gas

The Policy Institute made a concerted effort to advance bills that corrected what we judge to be excessive tax breaks given by the Montana Legislature to the oil and gas industry over the past 20 years. Regrettably, the major bills on this subject failed.

For an overview of Montana’s system of oil and gas taxation, as well as an analysis of the state’s oil and gas tax “holiday” and recommendations for change, go to this page of The Policy Institute’s website. For a brief summary of Montana’s oil and gas tax policy, go to this opinion column.


Coal Tax

Reducing Montana’s severance tax on coal is a perennial exercise for coal companies and their elected allies in the Legislature. For the most part, the efforts have failed, with the notable exception of the passage of a 1987 bill that reduced the severance tax from 30% to the current 15%.

Sen. Jeff Essmann (R-Billings) introduced a bill to halve yet again the coal tax - to 7.5% -on coal mined for consumption in coal power plants or coal gasification plants that sequester carbon dioxide emissions. The Policy Institute opposed the bill, both because Montana’s coal tax has been one of the most successful tax policies in Montana’s history (it has provided significant, steady revenue to the state without constraining coal development) and because Essmann’s bill was worded so as to qualify even established coal production for the lower tax rate under certain – and likely - scenarios. Essmann’s bill passed the Senate, but was tabled by the House Tax Committee.

Confirmation of Dan Bucks as Revenue Director

Toward the end of the session, some Republicans soured - quite suddenly - on the notion that Dan Bucks would be confirmed by the Senate to continue serving as Director of Revenue, the state’s tax agency. Bucks is recognized as profoundly knowledgeable in tax policy and has a productive record of administering the Department of Revenue for four years under Governor Schweitzer. However, forthright and fair as Bucks is, he doesn’t veil his belief in progressive taxation and sometimes frustrates legislators (of both parties) with his tendency to overwhelm interlocutors with detail.

For several days before the hearing on a bill to re-confirm him as Director of Revenue, it appeared as though Bucks’ chances of gaining approval by the Senate Tax Committee were minimal, and, even if committee assent occurred, it was doubtful in the full Senate.

During Bucks’ confirmation hearing, however, several individuals and organizations testified on Bucks’ behalf, and his detractors failed to mount a serious attack on his performance. He was subsequently endorsed by the Tax Committee, then by the full Senate.

For appointments to the governor’s cabinet, only confirmation by the Senate is required, so Bucks will remain at his post.

Sine die!