Page 8 - EOB Dec18

TAX STRUCTURE
A TAXING STATE:
LOOKING AT OPTIONS FOR MONTANA’S TAX STRUCTURE
BY ALEXANDRIA KLAPMEIER
When discussing tax policy, economists use the metaphor of a three-legged stool. In the anecdotal example, one leg represents property tax, the other income tax and the third is sales tax. When talking about Montana, the state has two of the three legs.
“Montana is one of the few states that doesn’t have a general sales tax,” said Webb Brown, the president/ CEO of the Montana Chamber of Commerce. “But times are changing. As Montana’s economy changes, busi- nesses and the people of Montana are starting the feel the strain of certain taxes.”
Even before the special session in November 2017 highlighted problems with our current tax system and the Montana Chamber Foundation had already spearheaded a research project diving into Montana’s tax struc- ture and the options the state should consider.
DIVING INTO TAXES
Last year, the Montana Chamber Foundation began working with the State Taxation Research Institute (STRI) an af liate of the Council of State Taxation, to conduct an analysis of Montana’s tax structure.
“I was encouraged that the Montana Chamber of Com- merce was willing to take on that kind of project,” said Mike Green, a tax lawyer at Crowley Fleck in Helena. “I think the challenge I see in Montana tax law is our heavy reliance on the two legs of the stool. I think we’ve seen the overly burdensome impact that our property tax has on Montana businesses.”
The STRI released its initial ndings from its study at the Montana Chamber’s Annual Meeting in October. At
compare to our neighbors. In order to achieve the goals of our 10-year strategic plan, such as job growth in Mon- tana, we need to have a business-friendly tax climate that will attract companies to make Montana home.”
CRUNCHING THE NUMBERS
When reviewing Montana’s current business tax struc- ture, the Treasure State’s business tax rate is 12th highest in the U.S. According to the STRI, Montana’s total effective tax rate on business income is 5.1 per- cent compared to the U.S. average of 4.5 percent. The ndings report that Montana’s tax system is organized in a way that weighs heavily on capital investments and new businesses.
High business property taxes, corporate income taxes
This study is the of our research initiative through Envision 2026, our 10-year strategic plan. This report gives us some hard data
to point to when we talk about the tax climate in Montana, and it shows how we compare to our neighbors.
the meeting, the STRI gave members a rst look and its analysis and some possible reform options in future legislative sessions.
The analysis is complete and the results are currently being processed. Released during the Annual Meeting were the high-level ndings of the Phase II incremental and broad-based reform options. To view the high-level ndings, visit the Montana Chamber’s website at www. MontanaChamber.com.
“This study is the of our research initiative through Envi- sion 2026, our 10-year strategic plan,” said Brown. “This report gives us some hard data to point to when we talk about the tax climate in Montana, and it shows how we
and a high overall business tax rate make it harder to make capital investments in Montana.
“Montana’s lack of a broad-based consumption tax requires greater reliance on property and income taxes, which result in a less-favorable business tax compet- itiveness environment for many Montana industries compared to neighboring states,” said Tom Neubig, one of the economists working on the Montana Chamber’s tax study. “Total business taxes in Montana as a share of the state economy is the 12th highest among all states. We analyzed some potential tax restructuring options including business equipment tax relief, equalizing prop- erty tax rates, a sales tax and a business entity level tax on consumption.”
8 Eye on Business ||| December 2018