David Crisp
Bob Story, executive director of the Montana Taxpayer Association and a former state legislator, has struck back with an op-ed piece taking on claims that income tax cuts passed in 2013 are cutting into school maintenance funding today.
Story probably was referring to an opinion piece by educators, but since Last Best News has reported in considerable detail on this topic, allow me to retort. Those old tax cuts matter because gubernatorial candidate Greg Gianforte has argued that income tax revenues actually increased after the cuts, and he has proposed doubling down by cutting rates even more.
The Montana Budget and Policy Center argues that the earlier tax cuts have cost the state close to a billion dollars, enough to pay for deferred maintenance costs on all Montana schools. Neither the Montana Department of Revenue nor the University of Montana’s Bureau of Business and Economic Research has found conclusive evidence that the cuts helped the Montana economy.
Story is on target when he writes that it’s “wishful thinking” to believe that the pre-2003 tax rates would have produced another billion in revenues. But it’s also wishful thinking to believe that they wouldn’t have. Taxes are complicated, and so are economies. Nobody knows for sure what would have happened.
But there are bigger issues here, mostly having to do with tax fairness. Story points out, for instance, that the top 1 percent of income tax filers paid more than 20 percent of Montana’s income taxes in 2014. He doesn’t mention that the top 1 percent also had more than 19 percent of Montana’s income.
Gianforte’s proposed top tax rate of 6 percent, down from 6.9 percent, would move Montana even closer to a flat tax. The flat tax has its defenders, but I prefer Jesus’ analysis. He said that the widow who gave two mites to the treasury was paying more than the rich folks because she really needed that two mites.
Story also is right that income tax revenues have gone up despite the 2003 tax cuts. Montana adjustable gross income rose a tad more than 50 percent from 2004 to 2013. Income tax revenues rose about 58 percent.
He doesn’t mention how much of that big increase in income has gone to the wealthiest Montanans who benefited most from the 2003 tax cuts. From 1979 to 2012, the income of the top 1 percent of Montanans increased 163 percent. For everybody else, the increase was 0.5 percent. By 2012, the average 1 percenter made nearly 24 times as much as the average 99 percenter.
Oddly, Story mentions that the Montana Department of Revenue predicted in 2003 that high-end taxpayers would pay more under the new law because of other changes the law made. But he neglects to mention that a 2006 DOR report found that actual tax rate reductions for Montanans earning more than $90,000 were up to three times greater than had been predicted.
For some reason, Story also fails to mention that at least as recently as 2011, Montana ranked dead last among the states in the income tax threshold for a two-parent family of four. If you have ever paid wages, you know that Montana law requires you to start withholding taxes from your employees at income levels far below what federal law requires.
In 2013, Montana ranked third in the nation in income tax burden on a family of four with two children at poverty level. Moreover, Montana is not among the 22 states that provide some sort of earned income tax credit to help the poor.
A consequence of Montana’s passion for taxing poor people is that the bottom 20 percent of earners here pay a higher share of their income in state and local taxes than the top 20 percent. The top 1 percent pay the lowest of all.
Story mentions that the 2003 tax law changed capital gains tax treatment, but he doesn’t say how much. Let’s put it as simply as possible: The firefighters who risk their lives to protect us pay taxes at a higher rate than the rich kids whose labor consists of checking their portfolios a couple of times a year.
Story notes that the burden of paying for school maintenance falls largely on local school districts. But he fails to mention that Montana ranks 41st in the nation in capital spending for schools, about half the national average.
Local school boards decide how to spend their own money, Story writes, then adds, “The current trend is to spend more dollars on salaries and benefits and less on facility maintenance.”
Now why would that be? Perhaps it’s because a rundown school can hang on for years. An underpaid staff never stops looking for a way out.
Finally, Story said that since the passage of that 2003 bill, nobody has offered a “serious proposal to fix this alleged problem.” The Montana Legislature passed five bills affecting income taxes in 2011 and six in 2013. In 2015, Gov. Steve Bullock vetoed at least three income tax bills.
When it comes to tax bills, “serious” seems to be in the eye of the beholder. The same could be said for op-ed pieces.
