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Regier’s plan makes middle-class a priority

by Daily Inter Lake
| February 2, 2025 12:00 AM

Lower taxes have been a key talking point for Gov. Greg Gianforte as he rolls out his budget priorities for the 2025 Legislature, and last week he showcased his plan to reduce the state income tax rate for most earners.  

The state currently has two income tax brackets: 4.7% for up to $21,100 of income for single filers, and 5.9% for income above that threshold. Gianforte’s proposal would lower the top income tax rate a full percentage point — from 5.9% to 4.9%.  

“We’ve heard from Montanans that this is a priority, and that they should keep more of what they earn,” the Republican said in a press conference last week, adding that a lower rate is needed to keep the state competitive.  

For comparison, income tax rates in the Rocky Mountain states are across the board. Wyoming, Washington and South Dakota have no income tax, North Dakota taxes at 2.5% on the high end, Idaho has a flat income tax rate of 5.8% and Oregon levies 9.9% on the highest bracket. It’s important to remember that every state’s revenue structure is different, with many states levying a tax on retail sales to offset a reduction from other sources.  

In Montana, 57% of revenue comes from individual income taxes, followed by 11% from property taxes. There is no state retail sales tax.  

Gianforte’s plan would lower state tax collections by about $350 million a year. With projected economic growth and savings through reduced spending, he’s confident his plan will lead to a balanced budget and more money in workers’ pockets.  

The state’s nonpartisan Legislative Fiscal Division, however, is decidedly less confident.  

In its budget analysis, the division fired a few warning shots about risks that lie ahead if the state’s post-pandemic economy cools or shifts over the next five years.  

“While Montana’s remote work, tourism and high-end housing related industries have all grown in the new economy, the future of these industries is less well known,” the report warned. “In the next 10 years, the construction of luxury housing may continue or decrease. Meanwhile the service industry for these luxury residences will likely grow as the community becomes more established. The pay for the service industries is typically less than construction work. Remote work and industries that work remotely may expand or retreat to in-person work.”  

In considering the proposed income tax reductions, “it is questionable if the governor’s proposed budget is structurally balanced in FY 2029,” the report cautioned.  

Adding in risks of a recession or the likelihood of fewer federal dollars from the Trump administration — about half of the state budget comes from federal sources — and Montana is at an “economic crossroads.”   

“Decisions of this magnitude will be made by the 2025 Legislature and will set up Montana’s state finances for success or failure for decades to come,” the report advises. 

In short, the Fiscal Division questions if Montana can weather economic storms that may lurk beyond the horizon, particularly under Gianforte’s sweeping tax plan that treats billionaires the same as minimum-wage workers. 

A more conservative income tax reduction plan floated by Sen. Matt Regier, R-Kalispell, offers a prudent segue to giving blue collar workers more of their hard-earned money back. 

Instead of reducing the rate for all earners over the minimum threshold, Regier’s bipartisan Senate Bill 203 takes the top bracket starting point from $21,100 to $100,000 for single payers. People earning less than $100,000 would be taxed at a 4.7% rate. Income above that threshold would be taxed at 5.9%.  

A fiscal note on Regier’s bill says it would reduce state revenue by about $28 million in 2025, then jump to about $220 million in 2026 and 2027.  

The plan homes in on savings for middle class workers first, while keeping the state coffers in a healthier position for whatever lies ahead in this “new economy.”