Small Town News

Stable tax policies bring more investment, jobs

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The job market is weakening, and the stock market is stuttering from day to day in its attempt to divine when economic recovery will occur. Now is the time to take stock of the impact of this uncertainty on the fiscal affairs and tax policy of the state of Montana. These impact Montana's number one need: the availability of better paying jobs. How do we encourage creation of better paying jobs and balance the state budget without tax increases? Those are my top two legislative priorities, and I'll propose a broad policy outline.

The next Legislature will have to peer into a very cloudy crystal ball, make its best guess of tax revenues from July 1, 2011, to June 30, 2013, and produce a balanced budget as constitutionally required. That raises the question of how to get to a balanced budget if the job market and tax revenues remain weak. We can learn a lot from the experiences of other states.

Three approaches have been tried. Some states have used a band-aid approach, taking money from this little fund and that, along with adoption of so-called temporary tax surcharges, to tide themselves over. Some states have made across-the -board budget cuts which harm all state functions but forgo the hard work of examining what is working and what isn't, and what is critical from that which is merely good. Across the board cuts act, in reality, to preserve the present structure of government to live another day And finally some states, like Oregon, have enacted so-called "targeted taxes" in an effort to fill their budget abyss. Despite that policy choice, Oregon found itself with a new $577 million deficit and was forced to make an across the board budget cut of 9 percent. Targeted tax increases have not solved their budget problem, and they certainly haven't encouraged job growth.

Contrast this with the comparative health of the Montana budget. The 2003 Legislature had courage and saw fit to reform and cut tax levels, even during a slowdown. As a result, Montana had an unprecedented period of growth that has left us far healthier than most states.

But, sadly and predictably voices are rising from Helena interest groups calling for "targeted taxes" in order to avoid the necessity of re-examining the size and scope of government. The long list of the "targeted taxes" proposed during the last three includes:

Limitation of the Residential mortgage interest deduction.

Imposition of an Oregon-style corporate gross receipts tax.

Increase taxes on video gaming.

Raise minimum corporate taxes.

Imposition of a Big Box Store tax.

Impose backup withholding tax on 1031 Federal tax-free exchange transactions.

Income tax surcharge on upper income levels.

Progressive property tax linked to income.

Soft drink tax.

Elimination of tax incentives for new oil and gas production.

$1 per barrel/ $0.08 mcf oil and gas surtax.

Repealing the Capital Gains tax credit.

Employers, big and small, need certainty in tax policy in order to make the decision to start here, move here, stay here or expand here. Confidence in the future is just as important for their investment psychology as it is for the typical Montanan making a spending decision at home. If we want to create jobs, we need a stable investment climate and a decent regulatory reputation. If we want to raise wages, we need to increase competition for employees by having more employers.

Maintaining a stable tax policy while other states are putting targets on the backs of their employers will create an opportunity for us to recruit those businesses and the jobs that go with them. Want better jobs? Keep and improve a stable tax policy even when times are tough.

Jeff Essmann is a Republican state senator from Billings who has served on the State Senate Committee on Taxation in the last three sessions.



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© 2011 Sidney Herald Sidney, Montana. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from DAS.

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