HELENA — The Montana Senate has given initial approval to a bill that would reduce state income taxes by more than $200 million a year – one of several active pieces of legislation that lay out different options for how to offer an income tax cut.
(Watch the video for a closer look at the income tax cut proposals.)
Currently, Montana has two income tax brackets. An individual pays 4.7% on the first $20,500 of their income and 5.9% on everything above that. For married couples filing jointly, the brackets are below and above $41,000.
Senate Bill 203, from Sen. Mike Yakawich, R-Billings, would raise the threshold, so the lower bracket would cover the first $100,000 of income for an individual and the first $200,000 for those filing jointly. On Monday, the Senate endorsed the bill on a 47-3 vote.
Yakawich has touted his bill as an income tax cut that will target Montana’s middle class.
“We want to thank them,” he said. “That money that they save – and you'll see how much they save as a married couple or as an individual – will come back into the community, stay in our state.”
Last week, Gov. Greg Gianforte touted his own plan for lowering income taxes: Senate Bill 323, sponsored by Sen. Josh Kassmier, R-Fort Benton. That bill would reduce the tax rate for the higher income bracket – to 5.4% in 2026 and 4.9% starting in 2027 – and it would increase the earned income tax credit. SB 323 had a hearing in the Senate Taxation Committee on Friday.
House Speaker Rep. Brandon Ler, R-Savage, has another bill, House Bill 337, which shares elements with SB 203 and SB 323. It would raise the threshold between the tax brackets to $47,500 for individuals and $95,000 for joint filers, it would reduce the top tax rate to 5.4% by 2027, and it would increase the earned income tax credit. HB 337 is set for a vote on the House floor Tuesday.
According to fiscal analysis from the governor’s budget office, each of the three bills would reduce annual state tax collections by between $247 million and $317 million by 2029.
During Monday’s debate, Yakawich said the Senate should move SB 203 forward and let the Senate Finance and Claims Committee keep fine-tuning the details of it and the other income tax proposals.
“This is really a nonpartisan bill; you can see all the people who signed on it,” he said. “Again, we're going to get some great income tax bills coming along here – I'm just saying this is one of a couple.”
Also on Monday, the Senate also advanced Senate Bill 434, which would create a one-time property tax refund of up to $400 for Montana homeowners’ primary residence. Sen. Wylie Galt, R-Martinsdale, called it “Plan C,” to make sure there’s some property tax relief for Montanans regardless of what the Legislature ends up doing with long-term property tax cuts.
“We are getting close to the end of the session, we haven't had any property tax cross the finish line yet, so this is a backup plan,” he said. “If nothing else comes, we at least have something that we can give out to the people of Montana.”
