The Republican tax-cut bill before the U.S. Senate would lower federal income taxes for the vast majority of Montanans, but almost half its aggregate cut -- $386 million next year – flows to the top three percent of income-earners, a state Revenue Department analysis shows.
The analysis, provided to MTN News, says about two-thirds of the 495,000 Montana households filing federal income-tax returns would see a tax cut of more than $50 a year, or at least 2 percent of their tax burden.
About one-third would see minimal changes – less than $50 a year – and only 1 percent would see a tax increase of more than $50 a year, the analysis said.
State revenue officials based the analysis on an early, announced version of the U.S. Senate bill, which has already undergone some changes and likely is facing action this week.
The Senate bill cuts individual income-tax rates for most brackets, increases the standard deduction that taxpayers can take, and eliminates deductions for state and local taxes, as well as some other credits.
Montana revenue officials said their calculations didn’t take into account every aspect of the bill – for example, the impact of removing some tax credits, because it can’t be known who takes certain credits, or detailed rule changes on certain benefits.
The analysis also didn’t look at the effects of cutting corporate tax rates, which is a big part of the bill.
Yet revenue officials said the analysis should give a generally accurate picture of how the Senate bill affects individual taxpaying households in Montana.
Highlights of the analysis include:
This group’s share of the federal tax cut under the bill is a bit more than its share of overall reported income in Montana. According to the state Revenue Department’s latest biennial report, the top-earning five percent of households in Montana reported 30 percent of the state’s income in 2015.
The Revenue Department also analyzed the Republican tax-cut bill passed by the House earlier this month, and found that it would result in a deeper overall tax cut, of $951 million – and that 43 percent of that overall cut would go to the top three percent of income-earners, or $410 million.
Montana’s Democratic U.S. senator, Jon Tester, has come out against the GOP tax-cut bill, saying it explodes the federal deficit and primarily benefits “wealthy out-of-staters” over working Montanans.
Tester also noted that the Senate bill’s individual tax cuts expire in 2027, while its corporate tax cuts are permanent.
Republican U.S. Sen. Steve Daines said Tuesday he favors cutting taxes, and that the bill will create jobs and “put more money in the hands of low- and middle-income families.” However, he also wants amendments to the bill to make its corporate tax cuts more beneficial for smaller businesses.
U.S. Rep. Greg Gianforte, R-Montana, noted that the House tax-cut bill does not cut the highest income-earner’s tax rate – but said nonpartisan analyses show it will spread benefits across all income brackets, create jobs and raise after-tax income for middle-income families.
"Low- and middle-income Montanans will see a big tax break with cuts to their tax rates and with the doubling of the standard deduction," he told MTN News. "Small businesses will see the lowest tax rate on their income since World War II, and America's businesses will become more competitive."