Tax Rebate Package Muscles Through Initial House Vote

House Republicans advanced a six-bill package Wednesday, Feb. 1, that would put more than $1 billion of the state’s historic budget surplus into rebate checks and other spending, pushing the measures through debate and initial floor votes.

In their current forms, the bills would authorize per-taxpayer rebates of up to $1,250 on 2021 state income taxes and up to $1,000 on 2022 and 2023 property taxes. They would also cut the state business equipment tax, cut capital gains taxes, pay down state debt and allocate $100 million to a highway construction fund. The six bills were passed out of the House Appropriations Committee last week. Barring a surprise reversal, the bills will pass final votes in the House Thursday before advancing to the Senate for further consideration.

Speaker of the House Matt Regier, R-Kalispell, acknowledged during floor debate that different Republican lawmakers have different ideas about what they’d like to see done with the surplus, which totals an estimated $2.5 billion, but he urged his caucus to support the combined package. “Our constituents who overpaid to operate state government are as diverse as this House, and I say we deliver for each and every one of those,” Regier said.

Democrats in the House minority opposed all of the bills except the highway construction fund, arguing Republicans were rushing large rebates through the Legislature instead of first working out how much the state can afford after addressing challenges such as the cost of childcare, nursing home closures and workforce housing.

Some Democrats noted that the Legislature traditionally passes its main budget bill, House Bill 2, late in legislative sessions when more information is available about the amount of revenue coming in from tax collections.

“We haven’t even paid our bills yet. We haven’t even passed a House Bill 2. And here we are, trying to spend money,” said Rep. Emma Kerr-Carpenter, D-Billings.

Democrats also argued that the property tax rebate measure, House Bill 222, is structured so that Montanans who rent their homes instead of owning them won’t receive any property tax relief, even though property taxes are routinely factored into rents. An amendment brought by Rep. Jonathan Karlen, D-Missoula, attempted to add a tax credit for renters. It failed on a party line vote.

“Without this amendment, this rebate excludes more than a third of working Montana families,” Karlen argued.

Republicans said the income tax rebate measure, House Bill 192, would put money back in the pockets of working Montanans, regardless of their living situation.

During debate on that bill, sponsor Rep. Bill Mercer, R-Billings, held up a copy of the state’s income tax form, the document filed by most wage earners.

“If they have a tax liability — which they do, because they’re helping fund state government — if they have a tax liability of $1,250 that’s on that form, they get it back,” Mercer said.

Democrats also made unsuccessful attempts to remove language that Republicans inserted in the House Appropriations Committee to tie together the fate of the bills’ fates together, reducing their individual effects by half if any of the other measures are voted down or vetoed.

The six bills in the package are as follows. All except House Bill 267, which won unanimous support, advanced Wednesday on party line or near party line votes with Republican support and Democratic opposition: House Bill 222, which would put about $284 million into property tax rebates. In its current form it would provide rebates of up to $500 per homeowner for taxes paid in 2022 and 2023. The Montana Department of Revenue estimates that about 292,000 households would be eligible each year.

House Bill 192, which would put $480 million into income tax rebates. Individual taxpayers would qualify for up to $1,250 in rebates on their 2021 state income tax bill, and married couples who file jointly would qualify for up to $2,500. The revenue department estimates that about 460,000 taxpayers would be eligible.

House Bill 212, which would raise the exemption threshold for the state’s business equipment tax from $300,000 of business property to $1 million. It includes a provision to backfill local government revenues and would cost the state about $7 million a year going forward.

House Bill 221, which would change how the state defines its capital gains rate and reduce the rates. It would set the state’s long-term capital gains tax rate at 3 percent for the first $41,000 of applicable capital gains income and at 4.1 percent for income beyond that.

House Bill 267, which would put $100 million into a highway construction fund. Supporters have said the money would make it possible for the state to access additional federal transportation matching funds. Unlike the other bills in the package, HB 267 advanced with unanimous support from the committee.

House Bill 251, which puts $150 million into paying down existing state debt.