New Year Brings Lower Taxes to Montanans

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Senators Jason Ellsworth, Becky Beard, and Greg Hertz Friday, January 5th, 2024   2:14pm  

There’s no way Republican legislators would rather ring in a new year than with lower taxes, and that’s exactly what we’ve done to kick off 2024. 

As of January 1st, Montanans of all income levels are now paying lower income taxes, thanks to legislation that just went into effect. Those tax savings will be felt either on upcoming paychecks or when you file your 2024 taxes next year, depending on where and how you get paid. 

Senate Bill 399, passed in the 2021 legislative session, made a number of changes to simplify Montana’s income tax system. It has the effect of completely eliminating income taxes for between 50,000 and 90,000 of the lowest income Montanans, such as parents or retirees who only work part time. It’s the biggest possible tax cut for the lowest-earning 70,000 (give or take) Montanans, bringing their income taxes to $0. 

Senate Bill 121, passed in the 2023 legislative session, cut Montana’s top income tax rate from 6.5% to 5.9% and increased the Earned-Income Tax Credit (EITC) from 3% to 10%. Most Montanans with full-time jobs pay the top rate, meaning most income-earning Montanans will now pay lower taxes. For those with lower incomes, they’ll also pay less taxes due to the higher EITC. 

In total, SB 121 provides about $170 million in annual, ongoing tax relief. Conservatives serving in the Legislature understand that your income is your money, not the government’s, and you should keep as much of your income as possible. 

Two things made these tax cuts possible: responsible, conservative management of the state’s budget, and Republicans serving in the Legislature. Regarding the latter point, Democrats uniformly voted against both SB 399 and SB 121. These tax cuts came only from Republicans. 

Regarding the first point: unlike property taxes, income taxes are directly controlled by the Legislature and are the primary source of funding for state government. Nearly all of the tax relief provided by the Legislature recently, including these permanent tax cuts as well as both the income tax rebates and the property tax “rebates” that went out last year, were paid for with income taxes. 

Let us repeat that: the $675 property tax “rebates” that the Legislature provided for both 2023 and 2024 were not actually “rebates” of property tax dollars. They were in fact funded by a state budget surplus of income tax dollars. 

We directed nearly $400 million of excess income tax dollars to go to property tax relief because we know Montanans are suffering from high property taxes. But the state’s surplus didn’t come from property taxes; property taxes don’t fund the state’s budget. What property taxes fund are county, city, and school budgets, which the Legislature does not control.  

We’re going to continue working on property tax relief beyond what the Legislature has already done, but it’s important for Montanans to understand that anything the Legislature does on property taxes is in response to local governments’ and schools’ needs and budgets, not state government spending.

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Sen. Jason Ellsworth, R-Hamilton, is the President of the Montana Senate. Sen. Becky Beard, R-Elliston, is the sponsor of SB 121. Sen. Greg Hertz, R-Polson, is the sponsor of SB 399.