Monday, April 30, 2007

Property tax cuts -- now we're getting somewhere

If Sales and Cooney were to subcontract the negotiations on property tax cuts to Montana Headlines and 4&20Blackbirds, it appears that we'd make more progress in a few hours than they made in 90 days.

Responding to our suggestion that Montana Republicans would have embraced North Dakota's recently-passed property tax credit legislation, 4&20 suggests that the Montana GOP wouldn't have done so because of their purported inability to compromise. 4&20 goes on to say that North Dakota's legislation "closely resembles Governor Schweitzer’s one-time tax rebate for Montana households."

Now, one of the frustrating things about following this entire fracas up in Helena is that details are skimpy, to say the least, about what each side actually offered or rejected.

The legislators have been sent home to do some explaining to their constituents -- but in order to ask our legislators to explain, we first have to know the facts.

Montana Headlines, for all its cautious habits, however, is going to go out on a limb and suggest that had a deal like the North Dakota legislation actually been on the table, Republicans would indeed have some explaining to do if they rejected it. We're pretty confident that Democrats didn't even come close to considering legislation like this.

We posted our comments about the North Dakota legislation not because we believe that the ND legislation is perfect or that North Dakota isn't deserving of all the jokes we Montanans tell on them. It was sheer serendipity that we ran across the item in the first place, and what initially drew our attention was that they were in the process of setting a record for length of session, precisely because they, too, were hammering out property tax relief.

We point out the details because this legislation is not theoretical, but is legislation that was actually passed by a legislature in the region in a state with a similar economy (oil and gas, agriculture, no big cities) and similar politics (strong Democratic party, 2 Democratic U.S. Senators.) And ND Republicans, for the record, are hardly "mouth-breathers" -- they are a pretty moderate bunch, to say the least. Some might call them positively liberal by comparison to Republicans in the intermountain west.

Consider the following facts about the North Dakota legislation:

1. It is long-term and as permanent as these things can get. It is ongoing, and not a one-time tax credit. It would need to be revoked by a later legislature.

They did wisely add a provision that the percentage of the credit can be lowered in 2009 if more than $44 million in credits are claimed next year -- in other words, a sort of automatic down-regulation provision, but without requiring each legislature to decide on a tax credit every single session.

"One-time," however, it is most definitely not.

2. Everyone gets the tax credit -- individuals rich and poor, small businesses and large corporations -- as long as they pay state income taxes. In other words, out-of-state businesses who do business in ND get the credit, while someone who owns property but doesn't generate income in ND doesn't get any credit at all -- a pro-business provision.

By contrast, the best offer that Democrats in Montana made excluded businesses, corporations, and families who made more than $45,000 (pity the two-income family where each spouse makes a whopping adjusted gross of $23,000.) The ND House held the line on this point, insisting that the plan initially passed by the ND Senate would have excluded all businesses and 70,000 North Dakota taxpayers -- and that such a plan had to be rejected for that very reason.

Sound familiar? The Montana Democratic proposal would have excluded 20% of Montana taxpayers from ongoing tax relief, as well as businesses and corporations. That's one reason why the Montana House rejected it.

3. People who don't pay taxes don't get credits -- none of this ridiculous idea of "credits" for taxes that aren't actually paid. If there is an excess, a voucher is given for credit against future taxes. No election-year hand-outs. Granted, both Republicans and Democrats went in for this foolishness in Montana this year, but that's not our fault at Montana Headlines.

4. It is a meaningful but prudent percentage reduction -- 10% for homeowners and 6% for businesses and farms.

5. There is a reasonable cap on the total amount of refund -- $1000 for businesses and married couples. By putting a cap on the credit rather than capping the income at which someone can get any credit at all (as in the Montana Democratic plan,) extremes for large corporations are avoided, but still everyone gets some relief.

In order to max out on the North Dakota credit, someone would need to owe $10,000 in property taxes as a couple owning a home or nearly $17,000 as a business. This means that only the very biggest get capped, while nearly all homeowners, farmers, ranchers, and small businessmen get the full effect of the credit.


In summary, the North Dakota property tax credit is meaningful long-term tax relief that goes to every property taxpayer who lives full-time or does business in the state, with a reasonable cap to limit what the very biggest property owners get back.

Sounds a whole lot more like the last offer made by the Republicans than the last offer made by the Democrats here in Montana.

Until we see concrete evidence that Montana Democrats were willing to agree to legislation designed along similar lines, we will stand by our statement that Montana Democrats never came to the table on this -- the single fiscal issue on which Republicans asked for meaningful compromise, after dropping all of their requests on spending restraint.

Oh, and North Dakota also added $200 million to their state's rainy-day fund and left a $150 million ending balance in the books for a cushion. And all state employees get a raise, school funding was revamped, etc. Not bad for a day's work (or rather 78 days work) over in NoDak.


Jay Stevens said...

You're right; we probably could have reached accord better than the current gang.

The tax credit sounds pretty good. I'd maybe lean towards making it a one-year deal with the current surplus, with the caveat that education spending shouldn't be skimped.

And I'd want the tax cheat bill, too. Or some semblance of it...

Anonymous said...

You know, I still haven't seen this "tax cheat" stuff explained very well. Recently my tax accountant, an avid Democrat, told me she was very upset about the Dan Bucks' proposals because of the unintended consequences they would have. She said she was mad enough about the issue to seriously consider switching parties. The idea of ensuring that anyone from out of state who is getting out of paying their fair share of taxes is a very good one. But I still don't have any idea if the administration's plan would actually do that... or would have adverse consequences here in MT as my tax accountant argues. I wish the press would do a better job of explaining this one.

Montana Headlines said...


The trouble with a one-year deal is that it forces a fight all over again every session about lowered taxes.

Increasing spending is easy to do -- it always pleases someone who can ally themselves with you and invoke sympathy or guilt in others.

Raising taxes is hard to do -- it always makes someone angry.

Governments should cut taxes in times of fat, in a reasonable manner, and then be forced to go through the pain of raising taxes.

Otherwise, we have the easy paths of raising spending and not going through tax cut fights combining to form a force that means a built-in institutional tendency toward higher spending and taxes.


I agree with you on the "tax cheat" issue. You will note that Jay qualifies his opinion with "some semblance."

We would all agree that "the idea of ensuring that anyone from out of state who is getting out of paying their fair share of taxes is a very good one."

The problem with the legislation as I understand it are precisely the unintended consequences. Your tax accountant is not the only tax accountant I've heard of who is concerned -- and they have been scrupulously honest accountants.

Anonymous brings up a larger point, one that I alluded to in this post -- we have a paucity of details on all of these pieces of legislation. Why the press doesn't cover these hot items in detail is beyond me.

Why doesn't the press send out a reporter to talk to all sorts of tax accountants who do taxes for Montanans of all income levels, and find out what the legislation really means for us, the residents of Montana?

Why doesn't the press send out a reporter to get the details on exactly which bridges have fishing access problems? Who are the owners, what is their story, who are the fishermen and what is their story? And how about going to the Stockgrowers and making them come up with concrete examples and people who would be adversely affected by the governor's amendatory veto?

You can bet they have them.

Where are the details in these pieces of legislation? I'm tired of generalities about "tax cheats" and "bloating the department of revenue." The parties are to blame -- both of them. The lobbying organizations are to blame. And the press is particularly to blame -- but then it's easy for me to sit on the sidelines and criticize.

Anonymous said...

Boy, I agree with you 100 percent here. When both sides are yelling at each other, and you don't know whom to believe, you would hope that the press would take a good hard look at the issue and shed some light. And these tax issues are particularly difficult for lay people to sort out.

Granted, this is difficult to do during a legislative session when everyone is swamped. But now would be a good time for something like this. (If I remember correctly, there was a longer story on this topic a month or two ago, but it still didn't really answer these questions. It just sort of repeated the charges being made by each side)