It’s the worst kept secret in Helena: Gov. Greg Gianforte and the Montana Legislature are going to cut taxes again. Anticipating a massive surplus in state revenue, Gov. Gianforte recently announced his administration is prioritizing further “permanent, long-term” tax relief for the upcoming 2023 Legislature. More tax relief is sure to be welcome news for working-class Montanans and business owners as they face skyrocketing inflation and painful local property taxes.
Tax Relief Made Possible By Conservative Budgeting
/ Op-Eds
Tax Relief Made Possible By Conservative Budgeting
"Montana’s state government is showing how to make tax relief successful. Local governments need to follow that example. Permanent, long-term tax relief is made possible only through a commitment to spending restraint."
Gianforte’s focus on tax relief stands in stark contrast to the local governments around Montana that are hiking property taxes this year. Both state and local governments are flush with cash from record revenues and federal stimulus. How can the state prioritize tax relief while local governments claim they are desperate for even more money from taxpayers? The difference lies in how they approach spending.
In March of 2021 I predicted that the key to successful tax relief in Montana would be spending control. By adopting fiscally conservative budgeting, I argued Montana could avoid the failed tax reforms of states like Kansas that cut taxes while raising spending. Legislators eventually followed this recommendation, passing a conservative Montana budget that successfully kept spending growth below the trend of population growth plus inflation.
Firm limits on new spending in the state budget made room for historic tax relief, cutting taxes for low and high income Montanans alike. Starting in 2024, tens of thousands of low-income Montana households will be dropped from tax rolls completely, meaning they won’t even have to file income taxes. This permanent, long-term tax relief was made possible thanks to the Montana Legislature’s commitment to keeping spending growth in check. Now, with the state experiencing a massive revenue surplus, Gov. Gianforte says even more tax relief is in the works for 2023.
The fact is, we’d be seeing a much different story play out if the Legislature had been reckless with state spending. It’s possible Montana would be looking at a much slimmer surplus, or even none at all. In that world, state leaders could be contemplating tax increases, not tax cuts. This is exactly what we are seeing happen with many local governments.
Instead of protecting taxpayers by putting firm limits on spending growth, some of our major local governments are busy spending record amounts of taxpayer dollars. Missoula’s governments have been particularly reckless, with the city growing spending 70% over population growth plus inflation since 2014. Missoula County is only slightly better, growing their budget 18.5% over population growth plus inflation the last 10 years.
Had Missoula’s governments followed the Montana Legislature’s example, limiting spending growth to no more than the rate of population growth plus inflation for the last ten years, combined they would have spared taxpayers from nearly $103 million in excessive spending in FY 2022. That’s $103 million could have been kept in taxpayers’ wallets. It’s no wonder Missoula taxpayers are suffering from unprecedented property tax increases.
It’s not just Missoula either. The city budgets of Helena, Bozeman, Billings and Kalispell have grown past population growth plus inflation by an average 56% over the decade. Lewis & Clark, Gallatin, Yellowstone and Flathead counties have outpaced population growth plus inflation by 23% over the same time period.
Montana’s state government is showing how to make tax relief successful. Local governments need to follow that example. Permanent, long-term tax relief is made possible only through a commitment to spending restraint.
This column originally appeared in Lee Newspapers.