Bills would add tangles to tax code

Two bills going before the House Taxation Committee today demand close scrutiny.

Senate Bill 521 is called "an alternative minimum corporate fee" but what it should be called is a blatant attempt to raid the pockets of large corporations because it is politically convenient to do so.

How Gov. Schweitzer could possibly keep a straight face if he were to sign this bill is incomprehensible. He campaigned, remember, on a pledge not to increase taxes.

Like all tax law, SB 521 is hard to understand, especially for those of us who are not accountants or lawyers, but what it amounts to is a flat tax on gross income for companies that have annual worldwide sales of $20 million or greater or which have a corporate payroll of at least $4 million.

The theory in this case is that these big corporation are somehow not paying their fair share of taxes, but the facts are that they are paying their fair share of taxes - using the same rules that apply to everyone else. Any such company has the right to use legal deductions to income in order to lessen its tax burden. These deductions are not made up by the companies; they are created by the Legislature.

If therefore the Legislature doesn't like the deductions, it should remove them. It should not change the rules for a select group of taxpayers in order to squeeze more blood out of them.

The governor may tell you this bill is revenue neutral, but don't believe it. The "fiscal note" attached to the bill says it will have a net impact on the general fund of just $1.27 million in 2007. That is a vast understatement of its real-world impact. Indeed, Plum Creek alone would expect to pay an additional $4 million in taxes.

Now, if the Democratic Party wants to be known as the party of high taxes and the party that created an anti-business climate in Montana, then they should by all means adopt Senate Bill 521. But they should also send out an apology to all the voters for putting a bright, shiny nail in the coffin of the Montana economy.

Finally, there is Senate Bill 513.

We admit we were originally somewhat enamored of this one. Gov. Schweitzer sold it as a bill to crack down on "tax cheats," and we hate cheats as much as the next person.

But the fact of the matter is, upon closer inspection, it is apparent that SB 513 is in fact much more than a bill to increase scrutiny of tax cheats. If that were in fact the purpose, then it could be achieved quite simply by increasing the budget for audits.

What Senate Bill 513 really does - and this is a step in the wrong direction - is increase the bureaucracy and complexity of the tax code so that even more people will be in violation of it.

There are new reporting requirements for a variety of individuals and businesses, and there is a lot of confusion about what is and is not a legitimate tax shelter. That leaves even honest individuals at risk for getting sucked into the confusing world of tax law. Individuals, for instance, could face a $10,000 penalty for failing to list a legitimate tax planning transaction, and the penalty is as much as five times higher for businesses.

Forget about it. This bill is a mess. If it doesn't include outright tax increases, it smacks of intimidation and threats to squeeze more money out of a variety of taxpayers.

If Gov. Schweitzer and the Democrats really want a lasting legacy, they should reform the tax code to make it simpler and transparent, not more complex and harder to fathom. Nobody like a tax cheat, but also nobody likes a grandstander.

These two bills, combined with SB 520 (which we wrote about yesterday) look like grandstand plays intended to convince us the Democrats are looking out for the little guy while all along making the tax code worse for all of us.