Hearing Tuesday in Montana to discuss cut in state income tax

Montana legislators on Tuesday will hold a hearing in the Senate Taxation Committee to discuss whether to cut the state income tax.

The proposal - Senate Bill 121 - would slash Montana's top income tax rate from 6.5% to 5.9%. It would also create a new income tax bracket that would be even lower - 4.7% - for lower income citizens. As the fiscal note details, the average full-time Montana resident would see a reduction in their tax bill of about $150 per year.

The bill also increases the Earned Income Tax Credit from 3% to 10%.

This is a positive step forward for Montana and helps move the state to more parity with other states that impose income taxes. Idaho, for example, just dropped its income tax to 5.8%. We have highlighted the movement to lower income tax rates among the states here.

Legislators may want to go a step further and tie further rate reductions to increases in state revenue. We detail how to adopt revenue triggers in our latest study.

Another tax bill will also be heard on Tuesday. Senate Bill 124 would simplify Montana's corporate taxes. Senator Greg Hertz says "by moving to a single sales factor on corporate taxes, we’ll be cutting taxes for many Montana businesses and treat them the same as out-of-state corporations, instead of our current system that penalizes home-grown Montana companies.”