HELENA — Accountants and business groups backed a bill Friday to simplify Montana’s individual and corporate taxes, but the state Revenue Department and recycling and energy conservation groups opposed it.
At issue before the House Taxation Committee was Senate Bill 171 by Sen. Bruce Tutvedt, R-Kalispell.
“It broadens the base,” Tutvedt said. “It lowers the rates.”
He added that the bill “takes a very complex tax system and makes it better.”
The bill would make federal taxable income — with a short list of adjustments — the base for the state’s individual income tax, according to the fiscal note accompanying the 75-page bill. It also eliminates some credits and deductions for individuals and corporations.
It would reduce the number of tax brackets, setting two tax rates for individual taxpayers — 4.8 percent and 6 percent — in place of the current seven rates that range from 1 percent to 6.9 percent. The bill would set up separate tax table rates for taxpayers filing joint returns and change how capital gains are taxed.
Tutvedt said, as legislators know, he hates tax credits, which are dollar-for-dollar reductions in taxpayer liability. He said he got rid of some credits but kept others that help lower-income people
Tutvedt said he removed a tax credit for homeowners to get more energy efficient windows. He said this credit is mainly used by wealthy people, although those arguing to retain that credit disagreed.
George Olsen, a retired certified public accountant, endorsed the bill on behalf of the Montana Society of CPAs.
“The bill provides much needed simplification,” he said, adding, “The taxpayers may choose to do their own returns, which eliminates the need for us, so I’m glad I retired.”
If passed, SB171 would eventually lead the Revenue Department to reduce its staff by 11 employees, one supporter said.
Glenn Oppel of the Montana Chamber of Commerce called SB171 “a really important tax reform measure that will improve Montana’s tax climate.”
Nationally, he said, income tax compliance costs businesses, individuals and tax agencies billions of dollars in time and money.
Also supporting the bill were representatives of Montana Taxpayers Association and National Federation of Independent Business.
The bill’s opponents included representatives of the Montana Recycling Association, Montana Renewable Energy Association, Alternative Energy Resources Organization, Montana Environmental Information Center, and businesses in Missoula and Livingston that install alternative energy systems and cleaner wood stoves.
All were concerned about Tutvedt’s decision to eliminate tax credits for energy conservation, recycling and alternative energy systems.
Matt Elsaesser of Helena, representing the Montana Recycling Association, said the tax credit encourages investment to recycle what would otherwise be wasted products.
He presented a letter from William Shropshire, president and CEO of American Chemet Corp., who said his company uses the deduction on its Montana tax return. Each year, he said, the company buys millions of dollars worth of scrap and uses it in its manufacturing process.
Ben Brouwer of the Montana Renewable Energy Association said the tax credits help homeowners save energy and create jobs. Montana has more than 60 businesses employing at least 120 people installing renewable energy systems in homes, he said.
“This is an investment that pays dividends year after year after year,” he said.
Brouwer disputed Tutvedt’s claims that the energy-related tax credits were used only by wealthy Montanans. He said a number of Montanans in lower income groups also have used them.
State Revenue Director Mike Kadas called himself “a reluctant opponent” to SB171, saying he shared the concerns over the removal of the energy conservation and recycling tax credits.
Kadas said he’s still concerned about the number of individual taxpayers who would wind up paying higher taxes under the bill.
“We have worked really hard to reduce the number of losers and keep it revenue neutral,” Kadas said. “Right now, I’m kind of stuck. I don’t have any more rabbits in my hat.”
The director added, “I don’t know if this bill can be fixed in the remaining 20 days or less.”
Tutvedt remained optimistic that solutions could be worked out with the Bullock administration in the next few weeks.
“The pieces are in place to negotiate this,” he said. “We just have to keep the pressure on. This is a significant piece of legislation that has a lot of good in it, and I think we should push it over the top.”
In 2013, Gov. Steve Bullock vetoed a similar attempt by Tutvedt to revise individual and corporate income taxes in Montana.