HELENA — Gov. Greg Gianforte and Republican leaders in the Montana House and Senate have all talked about cutting state income taxes during the 2025 legislative session. This week, lawmakers are starting to look at possible plans to do that – but there are still a lot of different ideas on exactly how to structure the cuts.
(Watch the video for more on how Montana’s income tax structure could change)
Lawmakers considering different options for cutting Montana income taxes
Montana currently has two income tax brackets. An individual pays 4.7% on the first $20,500 of their income and 5.9% on everything above that. For married couples filing jointly, the brackets are below and above $41,000.
On Wednesday morning, the House Taxation Committee held a hearing on House Bill 337, sponsored by House Speaker Rep. Brandon Ler, R-Savage. By 2027, it would lower the top income tax rate from 5.9% to 5.4%, and it would raise the limit on the bottom bracket to $100,000 for individuals and $200,000 for joint filers.
“This is a bill I see that will help out everybody, from the low-income to your higher-income earners, and it will be spread across so that there’s, in my mind, no winners or losers here – every resident of the state of Montana will get an income tax break,” said Ler.
Ler said, once the bill is fully implemented, it will cut the state’s tax collections by about $300 million.
Jonathon Ambarian
House Speaker Rep. Brandon Ler, R-Savage, presented House Bill 337, which would cut Montana’s top income tax rate and widen the bottom tax bracket, Feb. 5, 2025.
During the hearing, opponents of HB 337 said too much of the benefit would go to wealthier Montanans, and that reducing revenues by that amount would threaten the stability of state services. Ler responded that he expected the reduction would be offset by attracting more businesses and income to Montana.
Senate President Sen. Matt Regier, R-Kalispell, has backed Senate Bill 203, sponsored by Sen. Mike Yakawich, R-Billings. That bill, set for a hearing on Thursday, wouldn’t change rates but would set the bottom bracket to the same level as HB 337 – making the change immediate instead of phasing it in over several years.
Yakawich said SB 203 was intended to target income tax relief to those in the middle class.
“A family with kids making $100,000, both working, paying for daycare and everything else – it’s really middle class, and they’re struggling, so I really want to help them,” he said.
According to a fiscal analysis by the governor’s budget office, SB 203 would reduce tax collections by about $220 million each of the first two years it’s fully in effect.
Jonathon Ambarian
Sen. Mike Yakawich, R-Billings, is sponsoring Senate Bill 203, which would allow Montanans to pay the state’s lower tax rate on more of their income.
Yakawich has touted his bill’s bipartisan support. Several Democrats, including House Minority Leader Rep. Katie Sullivan, D-Missoula, and Senate Minority Leader Sen. Pat Flowers, D-Belgrade, have signed on as co-sponsors.
Meeting with reporters this week, Sullivan said Republicans had made it clear they intended to pass some form of income tax reductions, and that endorsing SB 203 was a way to show where they’d like those reductions to be directed.
“our focus was is first and foremost property tax relief. Of course, income tax as well.We’d like to see everybody be able to receive a benefit if there’s an income tax plan that goes through, and not just have it focus on the wealthiest Montanans, which is what we see as the proposal right now,” said Sullivan.
Gov. Greg Gianforte has laid out his own proposal, which would drop the tax rate even farther to 4.9%, and wouldn’t change the boundary between the top and bottom tax bracket, but would allow Montanans to claim a larger earned income tax credit.
A legislative bill draft that incorporates Gianforte’s priorities was requested by Sen. Josh Kassmier, R-Fort Benton. Kassmier told MTN this week he expects that bill to be introduced soon, but that it hasn’t been determined yet who will be the lead sponsor.
“The governor has proposed the largest income tax cut in state history by reducing the rate most Montanans pay from 5.9% to 4.9%,” a spokesperson for Gianforte said in a statement to MTN. “Additionally, to help lower- and middle-income Montanans, the governor’s proposal also boosts the earned income tax credit. The governor is supportive of this measure, and will carefully consider any bill that makes it to his desk.”
When presenting his budget proposal in November, Gianforte estimated his income tax reductions would total $850 million.