Gianforte, Joined by Grover Norquist, Touts Hefty Income Tax Cut Proposal
As the Republican governor proposes another cut to the state’s top-bracket tax rate, legislators of both parties say they have other ideas
By Eric Dietrich for Montana Free Press
Appearing alongside national anti-tax advocate Grover Norquist at a Thursday press conference, Governor Greg Gianforte touted his proposal to reduce Montana’s primary income tax bracket by a full percentage point, down from 5.9% to 4.9%.
The Republican governor also re-upped his pitch to lower homeowner property taxes by raising taxes on second homes and reiterated his opposition to a statewide sales tax, comparing the idea to a “tapeworm.”
“We’ve put forward a historic proposal. We look forward to working with the Legislature to get it done,” Gianforte said.
Gianforte has for years argued that lowering the state’s top-bracket rate, which currently applies to individual incomes beyond $20,500, would bolster the state’s economy by making Montana more competitive when job-creating entrepreneurs decide where to locate their business. He notes that Montana’s top-bracket income tax rate is higher than many states in the northern Rockies. Montana is also unique among its immediate neighbors in that it doesn’t fund public services with a statewide sales tax.
Since Gianforte took office in 2021, he and two GOP-controlled Legislatures have ratcheted down Montana’s income tax rates, reducing the number of brackets from seven to two and lowering the top-bracket rate from 6.9%. Those proposals have consistently faced opposition from Democrats, who deride them as a giveaway to the rich.
Heading into this year’s session, Gianforte’s budget proposal calls for the further reduction in the top-bracket rate, which, according to legislative fiscal analysts, would ultimately reduce state tax collections by about $350 million a year. In an effort to cut income taxes for lower-income working households, Gianforte also proposes expanding a state match of the federal Earned Income Tax Credit, providing a comparatively modest $20 million in annual savings to taxpayers.
The governor’s proposal to lower the top-bracket rate a full percentage point this year has drawn sharp criticism from Democrats and skeptical treatment from some of his fellow Republicans, who are again the Legislature’s majority party.
“The Governor’s income tax proposal was designed by — and benefits— the Governor’s ultra wealthy friends, not everyday Montanans,” House Minority Leader Katie Sullivan, D-Missoula, said in a statement sent after Gianforte’s press conference. “The vast majority of the benefit would go to the wealthiest earners at the top, while the rest of us would get peanuts.”
Leading legislative Republicans have offered up alternative income proposals that would, instead of lowering the top-bracket rate, raise the threshold where the top-bracket tax rate kicks in. That approach would offer a cut that would focus more relief on middle-income taxpayers.
For example, House Bill 337, sponsored by Speaker of the House Brandon Ler, R-Savage, would rework Montana income brackets so individual taxpayers pay at the lower-bracket rate, 4.7%, on their first $70,000 of income. Senate Bill 203, supported by Senate President Matt Regier, R-Kalispell, would bump the same threshold up even further, to $100,000. The latter bill has attracted co-sponsorships from several Senate Democrats, including Senate Minority Leader Pat Flowers, D-Belgrade.
Regier said in a Thursday interview that hopes the 4.7% tax rate can ultimately be applied uniformly to all taxpayers up and down the income spectrum, but thinks it makes more sense to work from the bottom up. “Let’s do middle class first,” he said.
House Democrats have also pointed to a December analysis by the Legislature’s nonpartisan fiscal division that expressed concern about Gianforte’s income tax proposal would mean for the state’s long-term financial health. The analysts note the governor’s proposed cuts wouldn’t take full effect until after the two-year period the current Legislature is writing a budget for.
“When considering the continued income tax reductions and known spending pressures, it is questionable if the Governor’s proposed budget is structurally balanced in [Fiscal Year 2029],” wrote a team of analysts led by fiscal division Director Amy Carlson.
The analysts also noted that an economic downturn or federal funding cuts pushed by the administration of President Donald Trump could inject uncertainty into the state budget. Federal dollars make up about half of the state’s current two-year operating budget, including $5.1 billion in health and human services funding and $1.4 billion in natural resources and transportation spending.
“[T]here are risks of recession and risks associated with potential efforts at the federal level to align revenues and expenditures more closely: such action could lead to reduced federal funding to states,” the analysts wrote.
Gianforte argued Thursday that further tax cuts are possible this year thanks to the way his administration has managed the state’s finances.
“We have passed very conservative budgets over the last four years, significantly less than the growth of inflation. And guess what? We have surpluses both structural and one-time. This has allowed us to put forward proposals to further reduce the tax burden,” Gianforte said.
Norquist is a longtime national advocate for lower taxes perhaps best known for a 2001 interview with NPR where he professed desire to reduce the size of government to a point where he could “drag it into the bathroom and drown it in the bathtub.” Standing by the governor Thursday, Norquist said many states are moving their income tax systems toward a single income bracket. A “flat tax” system with a single bracket, Norquist said makes it harder for lawmakers to raise income taxes because increases fall on all taxpayers regardless of their income.
A single income bracket-system, Norquist said, would send a message to potential investors that Montana is serious about keeping their tax burden low.
“People who invest and build in states don’t do so for two weeks or two years or 20 years,” Norquist said. “They do it for [the] long term, and they need to understand the likelihood of them getting their taxes raised.”
Norquist also said he favors property tax constraints, similar to California’s Proposition 13, that limit how much property taxes on individual properties can increase year to year. Gianforte opposed a similar measure pitched unsuccessfully by Montana anti-tax advocates in 2022, Constitutional Initiative 121.
Gianforte also said Thursday that he doesn’t favor proposals that would use income tax dollars to reduce property tax bills.
“If state government subsidizes property taxes with income tax revenue, it will create an incentive for local taxing jurisdictions to increase their spending,” Gianforte said.
Democrats have advanced a tax credit-based property tax relief proposal via House Bill 154, which cleared an initial committee vote with bipartisan support Wednesday.
The governor’s preferred property tax relief measure, Conrad Republican Representative Llew Jones’ House Bill 231, was still awaiting its initial committee vote Thursday.
Additionally, Gianforte reiterated his opposition to a statewide sales tax, which some lawmakers and local government leaders argue could be a way to lower property taxes by collecting more tax dollars from tourists.
“I want to be really clear: Montanans have spoken. They don’t want a sales tax,” Gianforte said. “Our focus is to make government as efficient as possible so we can reduce the burden of both property and income taxes on Montanans.”
He followed that remark by pointing to an anecdote Norquist had shared about New Jersey, where Norquist said adding sales and income taxes to the state’s revenue mix in an effort to offset high property taxes had eventually produced a state where taxpayers were saddled with “three tapeworms.”
“The last thing we want to do is ingest another tapeworm that is going to consume all available revenue,” Gianforte said.
Turns out Gianforte, when in Congress, voted to defund the FAA, the agency that keeps air travel safe. Perhaps he should put our interests first, instead of trying to find tax cuts for the rich.