States are in a fierce economic race for businesses and citizens to help grow their economies. Montana has been among the winners in this economic race, but more can be done to keep the state on the path to future success and remain competitive with its neighbors.
Among the ideas that could be considered are requiring a legislative supermajority for tax increases, using revenue triggers to reduce income taxes, adopting Truth in Taxation to improve property tax accountability, creating a Tax Transparency website, using a taxpayer receipt to provide a snapshot of government spending, and adopting Truth in Labeling for gas taxes.
One way to ensure that tax increases are the last resort of policymakers is by adding requirements to a state’s constitution that require a supermajority vote or voter approval to raise taxes. This type of taxpayer protection already exists in 17 states, but not in Montana.
Whether requiring voter approval for all tax increases like in Colorado or needing a 2/3 legislative threshold as occurs in Florida, increasing the tax burden imposed on Montana families and businesses should first secure a broad consensus and always be the last resort when budgeting.
Lawmakers in Montana have been working hard on income tax reform by reducing rates. While these efforts in Montana are welcome, the Treasure State risks falling behind its neighbors if it doesn’t take further action. So how can Montana lawmakers ensure the income tax burden remains low? One option is to use a revenue trigger for automatic reductions.
By using automatic triggers tied to revenue growth, there would be no need for special sessions of the legislature or one-time tax rebate checks. The reduction would happen automatically.
What about the concern about property taxes? One way to help bring greater transparency to the fact that spending is the main cause of property tax increases is with a reform called Truth in Taxation.
Utah was the first to adopt Truth in Taxation in 1985 (it currently exists in Iowa, Kansas, Nebraska, and Tennessee). Before moving forward with property tax increases, government officials in Utah need to first fill out a “Tax Increase Checklist” and comply with the “Tax Increase Requirements” details under Truth in Taxation.
Truth in Taxation was one of the recommendations made by Governor Gianforte’s 2024 Property Tax Advisory Committee. This reform would help empower Montana taxpayers to better engage and understand their local property tax burden and the connection to spending decisions.
There are even more opportunities for tax transparency. Montana’s Department of Revenue reports there are nearly 1,400 taxing districts in the state. This means the typical home and business could be subject to numerous taxing districts at the same time. The ability to hold the appropriate level of government accountable for that tax burden means knowing how much of the total tax bill they are responsible for and if the cost is worth the level and quality of service provided.
Now imagine if you could go to a tax transparency website and enter your home or business address to quickly see all the taxing districts you are subject to, at what rates, and perhaps be provided an educational calculator on your total estimated tax liability based on where you live.
This is the benefit of providing taxpayers with a tax transparency website to help make it clear which level of government is responsible for the taxes being imposed.
We’re also familiar with the shopping experience of seeing the total amount we owe ring up on the register and then being provided with an itemized receipt showing what we purchased. Now imagine if you were provided with a taxpayer receipt providing the same information for your tax dollars and how it relates to government spending.
By combining a taxpayer receipt with a tax transparency website and state budget transparency resources, Montana policymakers can help put taxpayers in the driver's seat to understand where their tax dollars are going and how much they are paying for those government services.
Finally, gasoline is one of the few products we purchase where taxes and fees are built into the price. This means there is little transparency about the true financial burden placed on consumers. The fix to this lack of transparency is what has been called “Truth in Labeling.” This reform can be as simple as placing a sticker on gas pumps showing the breakdown of state and federal taxes per gallon of taxes.
In Montana, the current state gas tax costs consumers 33 cents per gallon. This does not include the 18.4 cents federal gas tax, meaning the total cost of taxes is 51.4 cents per gallon for drivers in the state. Unfortunately, gasoline taxes are not transparent. In an age of data transparency, a “Truth in Labeling” policy is a reform worth pursuing.
The Treasure State has taken impressive steps to improve its tax climate and set businesses and citizens on the path to economic success. Montana’s neighbors have also been acting in this competition to attract and maintain residents, meaning more can still be done to help make the state the preferred place to live and open a business.
By adopting additional policies to improve the transparency and structure of Montana’s taxes, policymakers can keep the state’s “Open for Business” sign shining bright.