HELENA — Montana’s tax system, which raises more than $1.87 billion a year in general-fund revenue, is fairly volatile, balanced, progressive but at times difficult for taxpayers to complete their returns and for the Revenue Department to administer.
In broad terms, these were some of the assessments of the state’s tax system in state-by-state comparisons and other studies summed up in the Montana Department of Revenue’s Biennial Report. The 322-page report is available at http://revenue.mt.gov/content/publications/biennial_reports/2010-2012/Biennial-Report-2010-2012.pdf.
Ed Caplis, who heads the department’s Tax Policy and Research unit, guided the Senate and House Taxation committees through the report Wednesday.
Based on studies, here were some of the assessments of Montana’s tax system:
Montana ranks 39th nationally, with better than average relative variability in its taxes. States with the most volatile tax structures tend to have less diverse tax structures and depend more on volatile taxes on corporations and mineral severance taxes.
Despite not having a statewide general sales tax, Montana still has one of the more balanced tax systems among the states, the department said. A general sales tax usually is considered the third leg of the three-legged balanced tax stool, with income and property taxes making up the other two. Montana’s selective sales taxes and severance taxes provide the state with about the same share of revenue as general sales taxes do for most states, the report said.
Montana has one of the least regressive — or most progressive — tax systems among the states, according to some studies. Under a regressive tax system, taxpayers with higher incomes pay a smaller portion of their income in taxes. A progressive system is just the opposite, meaning taxpayers with higher incomes pay a higher portion of their income in taxes.
Montana has tied its personal income tax system closely to the federal one but has more differences with it than do most other states. One reason is that Montana allows married couples to file separate returns.
Montana also has more differences in federal itemized tax deductions than any other state and more income tax credits than most states do and more income tax credits than most states.
Ease of administration
The Revenue Department said Montana’s property is relatively expensive to administer because people get bills rather than make self-assessments of what they owe.
“Montana’s property tax is relative expensive to administer than other property taxes in some taxes, but does not have some complications found in some other states,” the department said.
The same state income-tax provisions that make it complex for certain taxpayers to file returns generally make it more expensive for the Revenue Department to process and audit returns, the agency said.