Empty Newport Transit Center wins Golden Turkey
A poorly planned park and ride facility in Newport that cost $6.45 million to build and sits empty just five years after opening won the third Golden Turkey Award, given…
As of January 2021, five states had taken steps to reform their tax codes, effectively reducing individual income tax the tax burden faced by their residents. Additionally, two states also reformed their corporate income taxes. Iowa for instance, cut its corporate income tax rate from 12 percent to 9.85 percent, bringing it on par with Minnesota’s corporate income tax rate.
Just recently, Montana just became the latest state to pass legislation reducing its taxes. According to the Tax Foundation,
Senate Bill 159 reduces the top marginal income tax rate from 6.9 to 6.75 percent while keeping the existing seven-bracket system otherwise unchanged. Although the rate reduction is limited to the top marginal rate, it benefits most taxpayers, as the top bracket starts at $18,700 for both individual and joint filers, while median household income in the state is $57,153. The rate reduction goes into effect in 2022, while the bill’s provisions expire after 2024, a sunset provision which was contingent on enactment of S.B. 399.
Montana has also passed a bill that simplifies their tax codes by bringing the state into conformity with the IRS, reducing tac brackets and eliminating some credits, as well as the marriage penalty.
Senate Bill 399 makes sweeping structural changes to the state’s individual income tax brackets and tax credits offered, and generally brings the state’s tax code into greater conformity with the Internal Revenue Code.
The biggest change the bill makes to the individual income tax system is scrapping the seven-bracket system and implementing a streamlined two-bracket system with rates of 4.7 and 6.5 percent, with bracket widths that are doubled for joint filers, avoiding the marriage penalty that currently exists in the state’s income tax. As part of this simplification, the state will adopt federal taxable income as the starting point for determining Montana taxable income, automatically incorporating the federal standard deduction.
Although the lowest rate rises to 4.7 percent, up from 1.0 percent, conforming to the federal standard deduction ($12,400 last year, compared to Montana’s current standard deduction of $4,790) yields tax savings for low-income taxpayers as well. For instance, a taxpayer making $20,500 a year—the point at which the new second bracket would kick in—would have paid $783 in taxes last year under the current system, but only $381 under S.B. 399 had it been in effect that year. Savings would be magnified for dual earning families since the legislation also eliminates the state’s marriage penalty.
Another bill passed by Montana also changes apportionment rules for corporate tax rates, effectively reducing the business’ corporate tax burden.
With other states enacting major reforms reducing their tax burden, our legislators should not be patting themselves in the back for failing to raise taxes. Minnesota is already highly taxed and is additionally facing a surplus. If anything we should be leading in tax reform so Minnesota can stay competitive in attracting talent, businesses, and capital.