MTPR

Senate Approves State Income Tax Simplification

Mar 5, 2015

The chairman of the Senate Taxation Committee again is trying to simplify Montana’s income tax system. For the second time, the Senate gave initial approval to Senate Bill 171 on a 28-to-20 vote.

The reason for another vote was because after the bill passed the first time it was re-referred to the Senate Finance and Claims committee to consider the revenue implications and then sent back to the full Senate.

According to the fiscal note, this bill is projected to reduce revenue to the general fund by nearly $5 million for Fiscal Year 2016. After that, the net effect could be positive or negative.

Regardless, the chairman of the Senate Taxation Committee Bruce Tutvedt reminds senators his bill would improve Montana’s income tax system.

"I think it’s a jobs bill because we’re going to simplify our tax system and make it one of the simplest in the nation," Tutvedt said.

Senator Christine Kaufmann is also a member of Senate Tax. She says there are a number of problems with this bill. One is it removes a current tax break for many married couples who file separately rather than jointly. The Democrat from Helena says another problem is the tax credits for energy conservation go away.

"Simplification is a good goal but by itself it’s not enough," Kaufmann said. "The tax system must also be fair and equitable."

In response, Tutvedt says his bill would require married taxpayers to use the same filing status as the federal income tax return. He says it’s fair.

As for elimination of the nearly a dozen tax credits, Tutvedt says, "most of the tax credits are used by high income individuals that would much prefer a lower rate than a tax credit."

Senate Bill 171 is similar to Tutvedt’s tax simplification bill approved by the 2013 Montana Legislature but was vetoed after lawmakers wrapped up their session.

The bill faces a third and final vote before being sent to the House for consideration.