Dept. Of Revenue: Business Equipment Tax Cuts Will Increase Local Taxes
Legislators are grappling over whether a proposal to further reduce Montana’s business equipment tax is a tax cut or a tax shift.
For proponents, the issue is clear. This tax on items like combines or welding equipment is punitive and stifles growth.
Tom Spika is president of Spika Welding and Manufacturing in Lewistown. The company is part of the burgeoning aerospace manufacturing industry in Montana.
"We are one of the sectors that stands to grow and contribute more than any other in this state."
But Spika says the business equipment tax is stifling his company. He points out advances in technology allow companies to set up shop anywhere.
"And if we’re sending the message, not only to our own homegrown companies but to those that are looking to move to Montana to do business because of what we have to offer here. If we’re saying to them right off the bat we’re going to start penalizing you for buying new equipment or expanding your operations," Spika says.
"Mr chairman and members of the committee. Mike Kadas. Director of the Department of Revenue kinda full-filling my duties as wet blanket."
Kadas says while he appreciates the proposal, by increasing the exemption amount from $100,000 dollars on business equipment to $500,000 the result amounts to a tax-shift, in other words, a tax increase to other property taxpayers.
"It will increase taxes in every local jurisdiction in the state to 90 percent of the taxpayers," Kadas said. "Business equipment makes up about 9 percent of the total tax base a reduction in business equipment without local government reimbursement will cause all the other taxpayers to make up the difference."
Most of the supporters and opponents to the bill pointed out that House Bill 213 needed an amendment to make local governments, education, and Tax Increment Districts whole and prevent such a tax shift.
When asked where that money would come from, the sponsor, Representative Mike Miller, said Montana has both strong individual and corporate income tax growth and there’s enough money in the general fund to meet the back-fill.
The House Taxation Committee did not take immediate action on the bill.