Montana Legislature

Feb 22, 2013 11:42 AM by Marnee Banks - MTN News

Flathead senator wants to simplify MT tax code

HELENA - A senator from the Flathead says Montana's tax code is far too complicated and it needs an overhaul. Sen. Bruce Tutvedt says reforming Montana's tax code is a top priority this session.

"I am excited to bring you this bill. It's a quantum leap I think. It's what the feds need to do, simplify the income tax and lower it," he stated.

Montanans now pay an average 6.9% tax rate on their individual income tax returns. Tutvedt's bill would lower the rate to 5.9%, and for those making less than $15,000 a year, the rate drops to 4%.

Supporters of the bill say it will make the Montana tax code one of the simplest in the nation.

"The current Montana individual income Form 2 tax booklet includes 43 pages of instructions. And that 43 pages of instructions is on top of the 214 pages of instructions that come with the federal return," said George Olsen with the Montana Society of CPAs.

The Society of CPAs and the Montana Taxpayers Association support the bill.

But, the legislation gets rid of several tax credits to offset some of the money that is lost by lowering the tax rate.

The two biggest credits being Contractors Gross Receipts Tax Credit and the Energy Conservation Tax Credit, so groups like the environmental community who benefit from them oppose the bill.

"I can certainly appreciate the value of simplifying the tax code and the value of reducing the personal income tax rate. But the value of these two particular tax credits is very important to a large number of individuals across the state," said Kyla Maki with the Montana Environmental Information Center.

The other big component of the bill lowers the capital gains tax by nearly 2%, but the bill does come with a price tag.

The Montana Department of Revenue predicts the proposal would cause the state to lose $4.4 million in revenue this budget cycle.

But, Tutvedt says the bill benefits the low-income and those with investments. And for those taxpayers who benefit from the tax credits, Tutvedt says the lower rate will make up for it.

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