Montana U.S. Sen. Steve Daines is balking at his party’s tax reform bill, saying Republicans aren’t doing enough for "main street" businesses.
Daines said in a press release Monday that he wouldn’t vote for the tax bill unless it did more for “main street businesses,” a term his staff later said referred to pass-through businesses.
Pass-through businesses are usually small enough that individual owners report business income on their personal tax returns. However, they're not all main street businesses. People with passive investments report capital gains as pass through-income. Businesses with up to $10 million are considered small by federal definition.
“Two-thirds of our job creation comes from main street businesses, and I’m doing what I can to make sure all of America is stronger and more competitive,” Daines said in the press release. “Before I can support this bill, this improvement needs to be made. I remain optimistic and will continue working with my colleagues to find a solution.”
Daines tweeted Monday that he spoke with President Donald Trump about the tax plan over the weekend. The Senate is expected to vote on the Republican tax bill this week. The bill currently offers a 43 percent tax cut to corporations and temporary cuts for individuals.
Montana’s Democratic Sen. Jon Tester said he also couldn’t support the tax bill as is, because it passes a $1.5 trillion debt to future generations.
“The Senate bill as currently drafted saddles our kids and grandkids with more crushing debt by adding nearly $1.5 trillion to the deficit,” Tester said in an email. “And it raises taxes on Montana families, forces cuts to Medicare, and benefits wealthy out-of-staters at the expense of hard-working Montanans.”
There are other Montana-specific concerns with the tax bill, like Montana losing its share of federal oil gas and coal royalty payments. The federal government splits those revenues with states where the leases are located.
Montana’s share of royalty payments last fiscal year was $23 million, according to the state Department or Revenue. Those payments would end under congressional pay-as-you-go rules intended to prevent lawmakers from cutting taxes without also cutting spending. The Office of Management and Budget identified the elimination of the royalty payments, which were tabulated for each state by the left-leaning Center for American Progress. Current tax cuts leave a $1.4 trillion hole in the budget over the next decade.
The deficit isn’t lost on social services advocates like Heather O’Loughlin, co-director of the Montana Budget and Policy Center. Medicaid and Medicare are slated for shrinkage. Tax benefits for the poorest Americans taper off early as benefits for wealthy Americans continue.
“This bill actually results in higher taxes for lower-income families over time. In fact, those with incomes below $30,000 would experience, on average, reduced after-tax income by 2025,” O’Loughlin said.
One the reasons poor people lose benefits early stems from changes to the Affordable Care Act, namely the elimination of the mandate that individuals have health insurance or pay a fine. The Congressional Budget Office estimated two weeks ago that 13 million fewer people would have health insurance with the mandate gone. O’Loughlin said people exiting the market would result in higher insurance costs for people who stayed.
Daines supports eliminating the individual mandate, which he calls a tax on poor people. In 2015, slightly more than 30,000 Montanans paid fines totaling $14 million.
Montana’s labor unions criticized Daines’ concerns about breaks for pass-through businesses, saying that pass-through companies would become a tool used by rich people to avoid taxes.
“His demands will result in the richest Americans setting up more pass-through businesses, robbing billions of dollars from Social Security and Medicare and potentially adding even more to the deficit,” said Al Ekblad, Montana AFL-CIO executive secretary, in a press release.