Montana revises feared revenue hit from tax bill

BILLINGS – Federal tax cuts passed into law will deliver less of a blow to Montana revenue than first expected, state officials say.

The Montana Department of Revenue initially forecast a $72 million a year loss due to the legislation. That’s after the Legislature recently met to address a $227 million hole in the state’s two-year budget.

The state funding outlook is improving, however: Montana State Revenue Director Mike Kadas no longer expects to lose $24 million in federal royalty payments for at least a year. State officials now forecast only a $46 million hit to state funding in 2018, the Billings Gazette reports .

Montana tax law will still be in need of changing to avoid a revenue loss due to a deduction allowed for pass-through businesses, said Department of Revenue tax analyst Ed Caplis.

But Rep. Jeff Essmann, R-Billings, doubted that would indeed be necessary for pass-through businesses, or small businesses whose proprietors pay individual rather than corporate income tax.

“Why the government, that’s been talking all year about budget cuts that harm the needy, would be pushing this interpretation that would cost a $40 million loss mystifies me,” Essmann said.

The impact should be even less after people reinvest federal income tax savings back into the state, Essmann said.