How much will Montana's income tax burden be reduced this year?

Recognizing that Montana imposes the region's highest income tax rate, state officials are looking to increase economic competitiveness and provide taxpayer relief this session with additional income tax cuts. How much, however, is in question.

Here are some of the current top regional income tax rates:

• Montana - 5.9%

  
  

• Idaho - 5.3% (reduced this year)
  

• Utah – 4.55%
  

• Colorado – 4.25% (temporary – capped at 4.40%)
  

• North Dakota – 2.5%
  

• Nevada/South Dakota/Washington/Wyoming – No personal income tax (though Washington does have a standalone 7% capital gains income tax)
  

Understanding the lack of competitiveness that comes from having the highest regional income tax rate, Governor Gianforte kicked off the 2025 Legislative Session by proposing an income tax rate reduction from 5.9% to 4.9%. Governor Gianforte noted:

“As I meet with Montanans in every corner of our state, I hear loud and clear: tax relief is a priority. That’s why we’ve proposed to cut taxes again this session, to once again deliver the largest tax cut in state history. Our tax cuts will let Montanans keep more of what they earn, help folks navigate the nationwide affordability crisis, and create a more prosperous future for our state and people.”

While a major income tax reduction effort sailed smoothly in neighboring Idaho this year, the waters are getting choppier than expected in Montana. As reported by the Montana Free Press on April 2:

“The Montana Senate Taxation Committee voted down two major tax bills backed by Gov. Greg Gianforte Wednesday, killing a measure that would have cut a full percentage point off the state’s primary income tax rate and another that would have increased property taxes on second homes as part of efforts to lower homeowner tax bills.”

Governor Gianforte responded saying:

“I fundamentally believe Montanans sent policymakers to Helena to address the challenges they face. Our focus remains on delivering meaningful solutions to those challenges: cutting taxes, creating a high-quality education system, and standing up for the most fundamental responsibility of government – to keep our people safe . . . Now there are a lot of proposals out there about how to reduce income taxes this session. Some only benefit some taxpayers. Our proposal benefits Montanans at every income level, just like our past proposals.”

As mentioned by Governor Gianforte, there are several income tax reduction bills in play this year:

• SB 323: Governor’s proposals to reduce the top income tax from 5.9% to 4.9% and expand the low-income tax credit. Approximately $300 million in taxpayer savings.
  

• SB 203: Raises income tax threshold so that more qualify for lower rate (Montana has a split rate of 5.9% and 4.7%). Approximately $230 million in taxpayer savings.
  

• SB 546: Creating a targeted tax credit for low-income. Approximately $200 million in taxpayer savings.
  

• HB 337: Reducing the top rate to 5.65% and increasing the income threshold. Approximately $260 million in taxpayer savings.

As this income tax reduction debate continues in Montana, other states are looking to phase out their income taxes entirely. According to the Associated Press:

“About 45 years have passed since a U.S. state last eliminated its income tax on wages and salaries. But with recent actions in Mississippi and Kentucky, two states now are on a path to do so, if their economies keep growing . . . Some other states also are pushing to repeal income taxes. The Oklahoma House passed legislation in March that would gradually cut the personal income tax rate to zero if revenue growth benchmarks are met. That bill now is in the Senate. New Missouri Gov. Mike Kehoe, a Republican, also wants to phase out the income tax. The House and Senate have advanced legislation that would take an incremental step by exempting capital gains income from taxes.”

When the final gavel sounds in Helena this year, what type of income tax relief will the Treasure State have: An across-the-board rate reduction to boost economic competitiveness and shed the label of having the highest tax in the region, or more targeted relief while other states take bolder action?