HELENA — The Senate, on a 34-16 vote Friday, endorsed the major Republican bill of the session to lower the state’s business equipment tax.
Senate Bill 96, by Sen. Bruce Tutvedt, R-Kalispell, passed with five Democrats joining all 29 Republicans. It faces a final Senate vote before moving to the House.
Tutvedt’s bill would reduce the property tax rate on business equipment, such as computers, logging equipment and tractors, to 1.5 percent on the first $10 million of equipment. The first $20,000 of equipment isn’t subject to the tax. It would be 3 percent for equipment valued at more than $10 million.
The current tax is 2 percent on equipment valued from $20,001 to $2 million and 3 percent for that valued at more than $2 million.
A trigger under a 2011 law sponsored by Tutvedt will be met and lower the tax rate next year to 1.5 percent on equipment valued at from $20,001 to $3 million, instead of the current $2 million.
The price tag on Tutvedt’s bill this year is $7.7 million in fiscal years 2014 and 2015. That’s what it will cost the state to reimburse local governments and schools for the lost property tax revenue. It rises to $10 million in the following two-year period.
Meanwhile, Gov. Steve Bullock, a Democrat, has a rival proposal, House Bill 332, by Rep. Mary McNally, D-Billings, to eliminate the business equipment tax for more than 10,000 companies whose equipment is valued at $100,000 or less. Its price tag is $6.6 million over the next two years and $8.1 million the following biennium.
Tutvedt pitched his approach Friday.
“This is a policy decision,” he said. “Are we going to provide jobs or help the companies that provide jobs in our state?”
Sen. John Brenden, R-Scobey, said this tax inhibits people from buying additional business equipment.
“It doesn’t help your economy,” he said. “This is the kind of thing that is stifling us in the state of Montana.”
However, Sen. Sue Malek, D-Missoula, said Montana systematically has lowered the business equipment tax over the past 24 years, from double-digit rates to the current rate.
“Montana already has an extremely healthy tax structure,” she said, citing ratings from national business and tax groups.
But businesses also want good schools, well-staffed police and fire departments, good roads and other government services, she said, “so we must be careful with our tax dollars.”
Sen. Greg Jergeson, D-Chinook, said the money to reimburse local governments and schools comes from the state general fund, largely funded by income taxes.
“This shifts the burden reduced on owners of business equipment to the income taxpayers of Montana,” he said.
Sen. Verdell Jackson, R-Kalispell, said most of Montana’s surrounding states have no similar tax and added: “I think it is good tax policy to actually get rid of the business equipment tax.”
Sen. Dick Barrett, D-Missoula, reminded senators they are required to pass a balanced budget.
While the cost of Tutvedt’s bill is “relatively modest” and could probably be absorbed, Barrett said the Republican majorities in both chambers have proposed a total of $350 million worth of tax cuts so far.
“This is just the first bite of the apple,” he said. “I don’t see how we can possibly proceed passing tax cuts in a willy-nilly way without thinking of the budget.”
In response, Tutvedt said, “Yes, there are other tax cuts coming, but I doubt many of them will get through Senate Taxation with your good help.”
Democrats voting with the Republicans on the bill were: Sen. Shannon Augare of Browning, Bradley Hamlett of Cascade, Larry Jent of Bozeman, Sharon Stewart-Peregoy of Crow Agency and Jonathan Windy Boy of Rocky Boy.