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This report compared Montana’s tax climate to six neigh- boring states and a cross-section of business types. These states included Colorado, Idaho, North Dakota, Utah, Washington and Wyoming. In a graph that compares Mon- tana’s total business tax relative to competitor states, the Treasure State falls at in two categories (see below).
“I thought Montana’s competitive position relative to
the neighboring states was very interesting,” said Paul Hopfauf, the Glendive Miles district manager for MDU Resources. “It was surprising how uncompetitive Montana is to our neighboring states with regard to business taxa- tion policy.”
The study also highlighted “sore thumbs” in Montana’s business tax climate and gives consideration to maintain- ing stable revenues while offering recommendations to make Montana a more business-friendly tax state. Some of the options presented included looking at incremental tax reforms and broader reform options to reduce income and property taxes. These included looking at items such as business equipment tax relief or a retail sales tax.
For property tax reforms, STRI recommend repealing the business personal property tax or equalizing property tax class rates for both real and personal property at resi- dential property class rates. Both options would reduce property tax burden, but also revenues.
TAX STRUCTURE
Replacing that revenue would require looking at other sources. When looking at two consumption tax options, STRI evaluated a retail sales tax and a consumption-based business activity tax.
A retail sales tax could include a broad base that includes most consumer products but excludes most business purchases. A Montana sales tax base rate at 4 percent (the maximum allowed by the Montana Constitution) could yield around $885 million.
A consumption-based activity tax (BAT) would consider
a rm’s total sales minus business input purchases that include all capital purchases and base equals sum of payments to factors of production. This would include cor- porations and pass-through entities. According to STRI, a comprehensive BAT would raise an estimated $298 million at a 1 percent rate.
One of the economists working on the study is Doug Lindholm, who pointed out how the sore thumbs hurt Montana businesses.
“The one thing that did surprise me was how bad the property tax system was and how different the rates are on industries,” he said. “Montana really does pick winners and losers in a very unfair method.” |||
@MontanaChamber
December 2018 ||| Eye on Business
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