Social Security income tax bill narrowly moves forward

Around 20 legislators stood up on the House floor Tuesday when Rep. Casey Knudsen, R-Malta, asked those who benefited from a bill that would strike taxes on Social Security income to rise and identify themselves. There were some chuckles and joking as standing clearly signified a legislators age and surely the number of those who stood don’t represent the true total number of those who would benefit.

House Bill 526 would repeal a state tax on Social Security income and would make Montana the 40th state to do so, sponsor Rep. Paul Fielder, R-Thompson Falls, said. This bill would apply to those with Social Security payments alongside other revenue streams like a pension or 401K, Fielder explained. The state would lose around $120 million a year in revenue, according to the fiscal note.

The bill received both bipartisan support and opposition, sparking debate on a bill Fielder also brought last session after it died in the Appropriations Committee. The bill might see a similar fate this session, with Chairman of the House Appropriations Committee Rep. Llew Jones, R-Conrad, voicing his opposition.

Jones explained that half of Social Security isn’t taxable because it was taxed when it was initially taken; he said the other half of Social Security, just like with a 401(k), is taxable because it went in tax free.

Meanwhile, Rep. Alice Buckley, D-Bozeman, pointed out that Montana does not have a sales tax, which other states that have passed these measures already have.

Jones also said the median income disparity between those under and over 65 was as much as $40,000, with new residents over 65 having an income over $84,000.

“We have a significant population that’s over 65. Those that already are only making Social Security, currently don’t pay tax,” he said.

Rep. Tom France, D-Missoula, came in as a strong supporter of the bill. France was one of those who stood as a beneficiary of the bill.

“All of the junior members could stand too because this is America’s safety net. This is what every senior, whether they’re working for a minimum wages or making much, much more than that, can count on as their retirement,” France said.

Minority Leader Rep. Kim Abbott, D-Helena, said this was a bad bill for the state.

“We are talking about 65% of the benefit of this going to the top 20% of wage earners in the state of Montana,” Abbott said. “Those aren’t people that really need a break.”

The bill passed 57-43 on second reading in the House, and it will need to pass third reading before likely going to House Appropriations.

Nicole Girten is a reporter for the Daily Montanan.