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MT revenue director: GOP tax-cut bill initially drops state revenue

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State Revenue Director Mike Kadas State Revenue Director Mike Kadas
HELENA -

Republican proposals to slash federal taxes could end up cutting Montana tax revenue by as much as $30 million the next two years, state Revenue Director Mike Kadas says.

In a memo this week to Gov. Steve Bullock’s budget office, Kadas said the proposed changes in federal individual income taxes would lead to higher Montana tax revenue.

But other changes, such as increasing corporate tax write-offs and cutting federal mineral royalty payments, would more than offset those increases, he said.

“We have big concerns about the overall effects of what they’re doing,” Kadas told MTN News in an interview Wednesday. “They’re essentially financing tax breaks with deficit spending. …

“We’re not allowed to do that at the state level. At the federal level, it’s questionable whether you should do it. The only time you should do deficit spending is when you’re trying to combat a recession. That is certainly not the case (now).”

The U.S. Senate voted along party lines Wednesday to begin formal debate on the bill, 52-48, with Republicans in favor. A final vote on the bill could come later this week.

The GOP’s Senate bill cuts individual and corporate income-tax rates and makes other changes, such as eliminating some deductions for individuals but increasing deductions or write-offs that corporations can take, to lower their taxes.

The tax cuts are projected to increase the federal deficit by $1.5 trillion over the next decade.

Republican supporters are arguing the cuts will help juice the economy, by injecting more money into the private sector and encouraging businesses to invest and raise wages. Increased growth will help offset the projected revenue loss, they say.

Kadas, appointed by Democratic Gov. Steve Bullock, said he’s not seen any credible economist arguing that the tax cuts will lead to broad increases in economic growth.

The Kadas memo outlined several likely Montana impacts from the proposed GOP tax-cut bills:

  • Because Montana’s state income tax is based off federal income-tax rules, the tax-cut bills’ elimination of several federal deductions for individuals will actually increase state taxable income – and therefore Montana income-tax revenue should increase $50 million to $60 million the next two years.
  • However, the bills also create a substantial new write-off for corporations, allowing them to deduct 100 percent of certain expenses that are now depreciated over time. That change will reduce corporate taxable revenue and cost the state an estimated $26 million over two years, the memo said.
  • The bills also cut federal mineral royalties, to offset some of their cost. That change would cost Montana $46 million over the next two years, the memo said.

Kadas told MTN News that his agency’s predictions are based on what they’ve seen of the House and Senate bills so far – but that much of what’s being developed has been shielded from public scrutiny.

“We’re still guessing to some degree at what the impacts are going to be,” he said. “Because we haven’t seen it in a bill. There have been no hearings. This whole process is kind of hidden from us.”

About Mike Dennison

MTN Chief Political Reporter Mike Dennison joined MTN News in August 2015 after a 23-year career as a newspaper reporter covering Montana politics and state government. While some may believe that politics are boring, Mike firmly believes that's not the case if you tell the story with pizzazz and let people know why the story is important.
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