HELENA — With two weeks left in the 2013 Legislature, the Republican majority’s hopes of passing tens — if not hundreds — of millions of dollars of tax cuts appear to be fading.
Legislators came to town January with a projected state ending fund balance of $488.2 million as of mid-2015.
Republicans, who control the House and Senate, dropped in bills to cut income, property and business equipment taxes by a combined total of nearly a half-billion dollars.
As the session winds to a close, however, it appears highly unlikely that Republicans will be able to pass bills that would reduce the state treasury by the many millions of dollars in revenue they had hoped.
The state budget can’t afford it, and Democratic Gov. Steve Bullock isn’t likely to sign costly GOP tax reductions into law.
Legislative leaders of both parties indicate that bills to reduce the property taxes on business equipment may have the best chance of passing.
As of Thursday, the projected ending fund balance was $151 million for mid-2015, according to an updated status sheet by the Legislative Fiscal Division.
What’s more, the budget is structurally imbalanced by $94.6 million. That means the state is projected to spend nearly $95 million more during the two-year budget period than it is receiving in revenue.
In his proposed budget in January, Bullock said he wanted the Legislature to leave a budget with a $300 million ending fund balance by mid-2015, and one that is structurally balanced.
He said Friday that his goals haven’t changed.
“Where the Legislature is as of today, given that they’re spending a heck of a lot more than they’re bringing in, they need to get that in balance before there’s even a discussion about tax cuts,” Bullock said.
Bullock said he won’t go along with any tax cuts unless the benefits go to Main Street Montana — his code words for everyday Montanans and small businesses.
His own tax proposals appear dead, but Bullock quoted legislative leaders in saying nothing is really dead until the Legislature finally adjourns. A cornerstone of Bullock’s campaign for governor was his plan to give each Montana homeowner a one-time $400 property tax rebate at a total cost of $100 million.
House Speaker Mark Blasdel, R-Somers, said there’s still time remaining to pass some bills reducing taxes.
“I think one we can all agree on is business equipment,” he said. “The governor campaigned on it.”
The House Taxation Committee recently combined two bills to cut business equipment taxes by amending House Bill 472 by Rep. Jerry Bennett, R-Libby, into SB96, by Sen. Bruce Tutvedt, R-Kalispell.
“I think they both complement themselves well,” he said. “One would eliminate taxes for over 13,000 small businesses and everyone else sees a reduction. With Tutvedt’s, the very large, capital-intensive companies will see some help as well.”
Senate President Jeff Essmann, R-Billings, agreed there is time to reduce some taxes.
“I’m hopeful we can reach agreement with the House and governor’s office for further reductions in business equipment taxes,” Essmann said.
However, Essmann said his personal preference would be to reduce income taxes.
“I think that’s the best way to stimulate the economy,” he said.
SB394, by Sen. Art Wittich, R-Bozeman, would provide a one-time, 5 percent income tax reduction in 2015. However, its $47 million price tag makes its chances of passing dim, some lawmakers said.
There are two income-tax simplification bills alive: SB282, by Tutvedt, and HB581 by Rep. Kris Hansen, R-Havre. Both eliminate a number of tax credits, exemptions and deductions and use the savings to lower tax rates.
Essmann said he prefers Tutvedt’s bill.
“I think it offers good tax simplification,” he said. “It offers the advantage of retaining special treatment of capital gains so when someone sells a farm or ranch they’ve had for generations, they’re not paying the same rate as earned income.”
Blasdel said both income tax bills have a lot of merit.
“Hopefully at the end of the day, we can lower the tax rates a little more,” he said.
House Minority Leader Chuck Hunter, D-Helena, said House Democrats are far more comfortable with one-time tax cuts than ongoing ones.
“I think there are far more tax bills and far more tax (cut) dollars than we can afford,” he said. “There are a few that can be done.”
Hunter said Democrats would probably agree the business equipment tax needs to be reduced over the long term.
Of the two bills, Tutvedt’s bill “has a little more things going for it, but not at that level,” Hunter said.
Senate Minority Leader Jon Sesso, D- Butte, said all four of his caucus’ goals — state workers’ pay and pensions, increased health care, infrastructure investments and K-12 and higher-education funding — are “alive and kicking.”
“We are in a position to achieve all four of the goals and provide some tax cuts as we move forward into the final stretch,” he said.
Legislators need to achieve the right budget balance before taking on more ongoing spending and one-time-only spending, he said.