New Year Brings Lower Taxes to Montanans
Author: Kyle Schmauch, Senate Republicans Communications Manager
New Year Brings Lower Taxes to Montanans
Kyle Schmauch
Senate Republicans Communications Manager
Montanans are now paying lower taxes after state legislation lowering income tax rates went into effect on January 1st.
“There’s no way legislative Republicans would rather ring in the New Year than by celebrating lower taxes for Montanans,” said Sen. Jason Ellsworth, R-Hamilton, the President of the Montana Senate.
Two bills lowering Montanans’ income taxes became law on Monday when they went into effect.
Senate Bill 399, passed in the 2021 legislative session, simplified Montana’s tax code by reducing the number of income tax brackets from seven to two, tying state taxable income to federal taxable income, and removing several tax credits.
SB 399’s tax changes eliminated income taxes for an estimated 70,000 low-income Montanans.
“My bill made the biggest possible tax cut for the lowest income Montanans, dropping their income tax rate to zero,” said Sen. Greg Hertz, R-Polson, the sponsor of SB 399. “Between 50,000 and 90,000 Montanans who have low incomes won’t have to pay any income taxes going forward.”
The second new law, Senate Bill 121, cut Montana’s top income tax rate from 6.5% to 5.9% and increased the earned-income tax credit from 3% to 10%. Those changes total about $170 million in annual tax relief.
Almost all Montanans with full-time jobs pay the highest income tax rate and will see their taxes lowered by SB 121. The increase in the earned income tax credit will benefit Montanans with lower incomes.
“My bill saves Montanans $170 million in taxes every year, freeing up more of their hard-earned money to spend as they see fit,” said Sen. Becky Beard, R-Elliston, the sponsor of SB 121. “Conservatives serving in the Legislature understand that Montanans’ income is their money, not the government’s, and they should keep as much of it as possible.”
Legislative Democrats uniformly voted against both SB 399 and SB 121.
“Taken together, these new laws provide broad tax relief to Montanans across income levels,” added Ellsworth. “This is a prime example of Republicans providing financial relief to Montanans by running the state’s budget responsibly and conservatively, allowing us to cut taxes.”
Income taxes are levied by the state and are the primary source of state government revenue. The income tax rebates provided by the Legislature in 2023, as well as the property tax “rebates” provided in 2023 and 2024, were all paid for by a budget surplus of excess income taxes.
“Many people don’t understand that the property tax relief that was called a ‘rebate’ wasn’t a rebate of property taxes paid, but was actually funded by income tax money,” explained Hertz, who chairs the Senate’s Tax Committee. “State government doesn’t collect property taxes to fund its services; that’s done by counties, cities, and school districts.”
“I’m excited to continue working on property tax relief beyond what the Legislature has already done, but it’s important for Montanans to understand that anything the Legislature does on property taxes is in response to local governments’ and schools’ needs and budgets, not state government spending,” said Ellsworth. “The income tax cuts that just went into effect are the result of the spending that the Legislature directly controls: the state’s budget.”
Governor Greg Gianforte is expected to appoint members to his recently announced Property Tax Task Force later this month, including state Senate experts on tax policy.
