Martz discusses legislative package - Montana governor plans to cut taxes to stimulate economy

By BOB ANEZ Associated Press Writer
The Missoulian


HELENA, MT- Gov. Judy Martz on Tuesday unveiled her legislative proposals to overhaul part of Montana's tax system, spur economic growth and help schools in the face of a state money shortage.

The package contained no surprises. The tax plan mirrors that recommended by advisory councils Martz appointed earlier this year and provisions she said weeks ago she favors.

Most of the education measures were made public when the governor's budget was released nearly a month ago. Lt. Gov. Karl Ohs said the proposals will not mean additional money for schools, but rather will result in smaller decreases in state funding than would otherwise occur.

The economic development initiatives deal with familiar issues such as making money more available to small businesses and doing more to train workers.

Martz said her tax plan, which includes creation of a sales tax that attempts to target goods and services used mostly by tourists, is not a tax increase because it doesn't mean a net growth in state revenue.

The tax, expected to raise $67 million a year, would offset the effects of an income tax reduction averaging 10 percent.

Martz reiterated her dislike for any legislative proposals for raising taxes as a way of helping erase the projected $240 million budget deficit.

"In good conscience, when you already pay 30 taxes and over 200 fees, how do you continue to tax people who can't afford to live in the state already?" she said.

However, Martz also repeated that she would not absolutely rule out approving a tax increase and would look at whatever lawmakers send to her desk.

Martz said she made economic development, tax changes and education the top priorities when she ran for governor in 2000, and that her wish list for lawmakers reflects those issues.

"No one can say we haven't stayed the course," she said.

Martz said the plan for remodeling some Montana taxes is an important part of her efforts to improve the economy.

"Our plan is about more than change," she said. "It's about restoring hope. It's about keeping our kids and grandkids here. It's about good-paying Montana jobs and a better future for Montana families."

When asked about many legislators panning her plan for cutting taxes in these days of deficit, Martz said, "I think they're not listening to their constituencies."

Most Montanans want changes in the tax system and lawmakers should not dismiss her ideas out of hand, she said.

In addition to the income tax cut, the administration wants to trim the tax rate on capital gains, which is money made from the sale of property or investments.

Kurt Alme, Revenue Department director, said only about 10,187 of the state's 384,220 taxpayers, or about 2.6 percent, would see a tax increase under the income and capital gains tax changes. The tax savings will average $164 and all income levels would save, he said.

Alme estimates Montanans would pay about 56 percent of the proposed sales tax, but said having the remainder paid by tourists would help shift some of the tax burden to nonresidents. The typical resident would pay $95 in sales taxes annually on such things as restaurant meals, rental cars and recreation fees.

The net effect of the entire tax plan would be an average tax reduction of $69 each year, Alme said.

The economic proposals would:

Allow the Board of Investments to buy loans made to businesses by local development organizations. The move would provide the groups with more cash to make more business loans.

Continue a collection of economic development programs, set to end in 2005, for another five years to give them more time to work. The extension would cost about $4.7 million and be financed through spending cuts elsewhere.

Dedicate income taxes collected from newly created jobs to pay for worker training programs in certain industries such as manufacturing.

Allow creation of regional groups to promote local development projects.

The recommendations for education would:

Provide money to help new teachers pay off college loans if they take jobs for at least four years in areas - both geographic and academic - where teacher shortages are worst.

Allow schools to give teachers more days for professional development without extending the school year, by lengthening class days.

Softening the effect of dropping enrollments on state funding by basing aid on the average student attendance over three years.


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