Montana again ranks 37th for total tax burden

– 04/10/04

With April 15 less than a week away, Montana taxpayers can take solace in the fact that in the eyes of a conservative Washington think tank, their taxes for 2004 are already paid.

According to the D.C.-based Tax Foundation, "Tax Freedom Day" arrived in Montana on April 4. Tax Freedom Day, according to the foundation, is the date when workers have earned enough money to pay their entire tax bill for the year. Montanans had their taxes paid a week ahead of the national average, as Tax Freedom Day for the country as a whole arrives tomorrow — the earliest in 37 years.

By JOHN HARRINGTON – IR Staff Writer

http://helenair.com/articles/2004/04/10/montana_top/a01041004_04.txt

"It’s earlier across the board," said Scott Moody, the Tax Foundation’s senior economist. "A lot of that’s due to the economy, as well as the federal tax cuts."

In its annual ranking of total tax burden (including all federal, state and local taxes), Montanans’ 26 percent of total income going to taxes ranked 37th in the country, the same as last year. Connecticut again held down the top spot (32.3 percent), while Alaskans again paid the lowest percent of their income in taxes (23.6).

Montana was one of eight states to adjust its individual income tax brackets to adjust for inflation, as it does every year, the foundation said. Moody said the adjustment is only fair.

"Not adjusting for inflation is a de facto raising of taxes," he said. "Adjusting for inflation is best for taxpayers because it puts transparency in the tax policy."

Montana also widened seven of its 10 income tax brackets, with the top rate, 11 percent, kicking in at $77,800, up from $76,200 the year before. The foundation makes no mention that Montana is one of few states that allows filers to deduct federal tax payments from their income, effectively lowering Montana’s income tax rates, but Moody said the federal deductability is accounted for in the total burden rankings.

Montana remains one of five states with no state-level general sales tax, along with Alaska, Delaware, New Hampshire and Oregon. Among neighboring states, Idaho last year raised its sales tax from 5 to 6 percent.

"Certainly, to get into the bottom 10, it’s almost a prerequisite that you don’t have one of the big three (general sales, property or income tax)," Moody said.

Montana was one of 14 states to raise its tax on tobacco last year, and one of eight to raise the tax by more than 35 cents a pack. The Legislature last year increased Montana’s tobacco tax from 18 cents to 70 cents a pack. Moody noted that in the big picture, income, property and sales tax rates figure much more prominently in a state’s overall tax burden than sin or gasoline taxes.

In a separate study, the foundation notes that Montana ranks 22nd on its State Business Tax Climate Index, which measures five elements of a state’s tax system: the percentage of all income that goes to taxes, individual income tax rates, corporate income taxes, sales tax and the complexity of the tax system.

Montana’s flat corporate tax rate of 6.75 percent ranks 28th nationally, according to the foundation.

John Harrington can be reached at 447-4080 or [email protected].