Income tax rates going down in Montana
Montana is joining the ever-growing list of states cutting its state income tax rate.
The state legislature has given final approval to SB 121, and the measure will be signed by Governor Gianforte.
The bill calls for two brackets for income tax rates starting in January of 2024 - 4.7% and 5.9%.
Montana's income tax rate was previously as high as 6.75%.
Last fall, Idaho lowered its income tax rate to a flat 5.8%.
At least 10 other states have reduced or flattened their personal income taxes in 2022, and many more did so in 2021. Idaho’s 5.8% rate and Montana's 5.9%, however, are still relatively high.
Montana's neighbor, North Dakota, is also looking at cutting its income tax rate.
Policymakers in the Mountain States shouldn't stop now.
It is clear, if Idaho and Montana are going to remain competitive (especially in the west), they need to consider further lowering their income tax rates, which are now relatively high. We have previously written about an idea to tie the income tax rate to revenue growth. This pro-growth policy would trigger automatic reductions in the rate so long as excess revenue is consistent. One thing is clear: Idaho and Montana lawmakers shouldn’t be content with state income tax rates near 6.0%. They should continue to look at ways to lower the burden. About a dozen states have tax triggers. The Tax Foundation says, “well-designed triggers limit the volatility and unpredictability associated with any change to revenue codes, and can be a valuable tool for states seeking to balance the economic impetus for tax reform with a governmental need for revenue predictability.”