Montana panel defeats tax increase on state's wealthiest

HELENA (AP) — A Democratic-led effort to increase taxes on Montana’s wealthiest residents died in a legislative committee Friday, underscoring the deep philosophical divide among lawmakers over taxes and spending that could hamper a budget deal.

The proposal before the House Taxation Committee would have increased income taxes on people making more than $400,000 a year. The plan by Rep. Kim Abbott, D-Helena, called for establishing an 8.9 percent tax bracket on those top incomes.

The party-line vote defeating the measure suggested a similar proposal by Democratic Gov. Steve Bullock for a new tax bracket on the super-wealthy could be dead on arrival, despite acknowledgement by Republican leaders that the budget woes won’t be solved unless both sides compromise.

The same House committee could soon debate the plan by Bullock, who is seeking a mix of spending cuts and new tax revenues to balance the state budget as required by law.

The governor’s tax proposals are facing deep scrutiny, particularly among Republicans philosophically opposed to new taxes.

On Friday, his proposal to increase taxes on wine — from 27 cents a liter to 54 cents — was met with opposition from some Republicans on the Senate Taxation Committee, after a stream of industry representatives raised concern about having to boost prices.

Bullock is also seeking more tax revenue from cigarettes and medical marijuana, among other measures. In all, the governor’s tax proposals would raise a total of $105 million over the next three years.

The governor called his tax revenue package “fair and modest,” adding that some lawmakers are instead suggesting deep cuts that would harm seniors and Montana families.

The largest new revenue stream would come from his proposal for a new top tax bracket on personal incomes over $500,000 a year, which could raise $37 million through fiscal year 2019.

The governor’s proposal has a higher income threshold and a slightly lower rate — 7.9 percent — than that proposed by Abbott.

“Even when we have a down cycle, the answer can’t always be raising new taxes. We need to find the right programs to trim and reset the dial,” said Senate Majority Leader Fred Thomas, R-Stevensville.

Republicans have tried to put pressure on the governor to scale back some of his proposals on taxes and spending.

House Appropriations Chairman Nancy Ballance, R-Hamilton, is targeting $120 million in spending cuts as a starting point.

“When we walk in here and he’s got a finished plan that we just don’t agree with, and the way he gets there and it requires very specific legislation to be passed by us, whose constituents clearly don’t want us to pass those things, then he puts us in an impossible situation,” Ballance said.