Setting the Record Straight on Tax Policy
Now that the dust has settled from extended version of this year's legislative session, we have a clear view of how Montana's taxpayers made out. Unfortunately, it's not a pretty picture.
The biggest failure of this legislature was that we provided virtually no tax relief. Sure, there's the much-ballyhooed, one-time $400 tax rebate championed by the Governor. What he didn't tell you was that you get this rebate only after paying your full tax bill, that a lot of Montanans won't qualify, and you'll owe income taxes on the $400. For an administration that values good publicity more than good policy, we should expect nothing less.
With current revenue surplus estimated at $1.4 billion, it's unbelievable to me that the Democrats were unwilling to provide any long-term reductions. In terms of real tax relief, homeowners got nothing; agriculture got nothing; and small businesses got nothing. But not everyone was a loser: the Governor did increase the tax credits available to Hollywood studios that film in Montana.
There was one small accomplishment in this legislature. We were able to stop a slew of draconian tax policy from becoming law. I'm referring to the policies that have been mislabeled "tax cheaters" legislation and mischaracterized as applying only to out-of-state companies and vacation-home owners.
These policies would have created a Department of Revenue that only an IRS auditor could love. The truth is that these bills applied to all Montana individuals and businesses. They would have introduced radically-intrusive requirements that would make tax compliance more difficult, and would have elevated the position of Revenue Director to "Grand Inquisitor" in the most powerful state-revenue agency in the country. The head of the Montana Society of CPA's said it best: "It's test-tube tax policy and you're the guinea pig."
This legislation was defeated by legislators who listened to their constituents and stood up to the bureaucrats who were intent on dramatically expanding their power. What's troubling to me were the tactics employed by these bureaucrats in promoting their power grab. Beyond the inaccurate "tax cheater" label they applied to their plan, I was dismayed at the way they manipulated data to serve their purposes.
During the special session, the Director of Revenue produced a letter in the House Taxation Committee that implied that several Montana business organizations opposed the legislation in order to protect their members. In this letter, the Director admitted that he had no way of knowing which companies made up the memberships of these organizations, but then went on to claim that a "significant portion of the out-of-state companies known to belong" to these groups were guilty of tax cheating.
This letter was presented as a legitimate study of the perceived problem with out-of-state companies shirking their taxes. But it was a study based on the Director's best guess at which companies were members of the groups in question, and it was based not on definite tax evasion, but on perfectly legal transactions that the IRS requires companies to report. Unfortunately, this was not an isolated example of the shoddy data used to support the legislation.
In my six years on the House Taxation Committee, I've never seen such an ugly accusation leveled at Montana organizations. The implication was that the opponent's testimony was dishonest and designed to cover ulterior motives. In the legislative process, it is every Montanan's right to present an opinion on legislation with the expectation that that testimony will be taken at face value. Legislators consider committee testimony to be honest and in good faith; personal opinions are completely acceptable, but lies are not. Without any real proof that testimony is erroneous, any accusation to that effect is completely unacceptable.
The lesson to be learned from this legislative session is that taxpayers should be wary of the bureaucrats in Helena. The record revenue surplus was quickly committed to new spending, rather than being reinvested in Montana's economy through permanent relief. Second, the rhetorical allure of "revenue enhancers" belies the fact that altering our tax policy can have major impacts on everyday Montanans.