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Economic official Dave Gibson: Tax reform needed in Montana
Montana’s economic future is doomed without tax reform, according to David Gibson, director of the governor’s Office of Economic Opportunity.
By Jim Mann
The Daily Inter Lake
On a stop in Kalispell Friday, Gibson and Commerce Director Mark Simonich outlined initiatives aimed at spurring job growth that will improve Montana’s per capita income, which has dropped from 33rd to 47th among other states in the last 20 years.
A turnaround will not come about unless there is a multi-faceted effort to create jobs through not just a couple, but many economic sectors, they said.
Tax reform is an essential part of the remedy, said Gibson. His boss, Gov. Judy Martz, has proposed to reduce income taxes and capital gains taxes with new state revenue coming from a limited sales tax. They will also try to offer a local option tax that will partly be used to reduce property taxes.
"This is tax reform targeting the people in Montana," said Simonich.
"We’re screwed unless we fix it," added Gibson. "But we’re not saved if we rely on (tax reform) alone."
The problem, he said, is that Montana’s tax structure is off-balance in its ability to fund schools and government and its ability to encourage investment and business growth.
On a national scale, Montana sends up numerous "red flags" to businesses that would potentially invest in the state. The capital gains tax and the high-end of the income tax are completely discouraging, he said.
"The capital gains tax is a huge red flag," he said. "You can’t go anywhere in the country and pay more."
Both Gibson and Simonich are well aware of the failures of past sales-tax initiatives, but they believe the "limited" sales tax proposed by Martz will eventually get serious consideration from state lawmakers.
When that happens, he said, more people will learn that the tax is not as regressive as past proposals, and that as part of the entire reform package, it will benefit Montanans at all income brackets.
Montana’s business equipment tax was for years among the highest in the nation, but it was reduced from 7 percent to 3 percent between 1997 and 2001.
Gibson predicts the benefits of that gradual reduction will come to fruition gradually. There are many reasons it hasn’t so far, mainly related to the economic fallout from last year’s terrorist attacks.
Business development and expansion has been at a standstill since then, Gibson said, but eventually that will change.
The Office of Economic Opportunity is largely focusing on the task of improving Montana’s per capita income, the economic statistic that Gibson prefers to use because it is so simple and important in people’s everyday lives.
An apparently modest improvement from 46th to 40th in the nation in per capita income would be a colossal achievement, he said.
It would require the creation of the equivalent of 50,000 jobs paying at least $30,000 a year, and it would add $2 billion annually to the state’s economy.
No state has ever increased more than nine spots on the per capita earnings rankings in a period of 10 years.
Improving six spots in 10 years is the goal for Montana, Gibson said.
And it will depend on growth in numerous economic sectors. The state needs to retain and expand timber jobs, Gibson said, but it would take 46,000 new timber jobs to achieve the goal. The state currently has about 9,000 timber jobs, he said.
Gibson explained that the creation of 50,000 jobs doesn’t necessarily translate to 50,000 new workers in Montana. The state has a 4 percent unemployment rate, which amounts to about 30,000 people, so there aren’t even necessarily 50,000 new workers available.
The state’s low unemployment rate actually discourages companies from establishing themselves in Montana. So Gibson’s office recently completed a report that illustrates a more telling "underemployment rate."
The report, he says, clearly shows there are 188,000 people in Montana who would move or switch jobs for higher pay.
Another report, expected within the next month from a prominent consulting firm, will set the groundwork for a "cluster strategy" for economic development. The strategy, proven in other states, basically aligns businesses with similar interests. Businesses that contract with out-of-state firms, for instance, may find their "out-sourcing" needs met right in Montana.
"We need to identify the types of companies and jobs that, when created, reverberate through the economy and have a dramatic synergistic effect on creating other companies and jobs," is how Gibson puts it in a summary on the strategy.
As part of the strategy, Gibson’s office is developing an online directory of Montana businesses that will be truly useful to businesses looking to network, he said.
Martz will announce her legislative packages for education, tax reform and economic development on Tuesday. Lieutenant Governor Karl Ohs, Revenue Director Kurt Alme, and Gibson will provide details of the three legislative packages.
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