News Release
Governor Martz Announces Tax Plan
4/15/2002
Mary Schwarz
406-444-5523
mschwarz@state.mt.us
“As the first component of our economic development plan, we are confident that the tax proposal which will be presented to the legislature will put money in the pockets of Montanans, bring in much-needed capital, and create and retain good paying jobs,” said Governor Martz.
There are three primary components to the tax plan:
· Cut income taxes by 10% and reduce capital gains taxes for all Montanans
· Replace lost tax revenue with a focused tourist tax
· Study the possibility of a local option tourist tax
“Today, on tax day, I am announcing a proposal for the largest income tax cut in more than 30 years for the people of Montana,” said Governor Martz. “We propose to cut income taxes for all Montanans by 10%. Beginning in 2004, this 10% tax cut will mean a reduction of $66 million in state income taxes each year.”
When the State of Montana is compared to other states in the region based on residential and commercial property tax rates and corporate income tax rates, we are generally competitive, but when compared on our income tax rates, Montana is not. Montana’s top stated marginal income tax rate, at 11%, is the highest in the region, leading to the perception that this is a high income tax state. This often keeps businesses and individuals from even considering Montana as a place to locate, or encourages them to leave.
Additionally, according to Department of Revenue Director Kurt Alme, Montana has the highest effective marginal capital gains rate in the region, even higher than our effective rate on ordinary income. This keeps some people and businesses from investing in Montana and causes others to leave the state to avoid this very high rate of tax on one-time gains from sales of farms and ranches, and other businesses and investments. “This plan will address those rates by reducing them to a competitive level,” said Alme.
But that lost revenue must be replaced, and this plan outlines a proposed tourist tax.
“While economic growth and more tax revenue will be the long-term benefits of this reduction, in the short-term, we will need to find another source of revenue. That source is non-resident tourists,” said Martz. “By exporting tax and importing revenue, we are shifting our tax burden off the shoulders of Montanans. This shift will put more money into the pockets of Montanans to spend and invest, and into Montana businesses to expand and create new jobs.”
The third component of the plan, a local option tourist tax, could be beneficial to local communities. Martz said, “Communities must be given the flexibility to address local economic development needs and property tax reductions.” The implementation of a local option tourist tax will ensure that tourists pay their fair share of the local government services they use.
In the coming weeks, three committees will be established to develop specific recommendations for a comprehensive proposal that will be presented to the Legislature.
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