Montana needs Tester’s leadership on taxes
Former Carbon County Commissioner John Prinkki (Courtesy John Prinkki).
I served as a Carbon County Commissioner for nearly three decades. In this position, I proudly managed balanced budgets for 24 years. As someone once trusted with managing public funds, I’ve been following events in Congress this summer.
Last month, the United States Senate passed a $1 trillion bipartisan infrastructure bill. This legislation is financed through a combination of offsets and includes nearly $3 billion for Montana highways, water projects and broadband. Montana Sen. Jon Tester was a lead negotiator of this bipartisan bill. In an era of extreme partisanship, it was no small accomplishment to get Democrats and Republicans to work together.
In the coming weeks, the Senate is expected to consider another bill with a price tag potentially three times as high. This legislation will make investments in families and workers by expanding access to education, childcare and health care. While the details are still being negotiated, this proposal is expected to be paid for in part by reforming the tax code so that the wealthiest Americans pay their fair share.
Asking the wealthy to pay a little more than the rest of us is a good idea. However, looking at some of the tax increases being considered, Montana is going to need Tester to lead his colleagues once again. There are some tax proposals being considered that are aimed at the wealthy, but will hurt hardworking Montanans, too.
The first proposal that needs to be stopped is a plan to eliminate the step up in basis provision from the U.S. tax code. Step up in basis is the tax policy that allows individuals like Montana farmers and ranchers to leave their assets to heirs without burdening those heirs with huge tax bills assessed on decades of past capital gains. The proposal to end step up in basis has caused alarm in rural communities. Promises of exemptions and special rules for family-based operations have not reduced this anxiety.
Thankfully, Tester is on the case. He was quoted in July as calling the proposal a “nonstarter.” Let’s hope he can convince other Senators to share this position.
A second tax proposal that needs another look is a plan to double the top tax rate on dividend income for those making more than $1 million a year. While this idea sounds like a great way to sock it to the rich, Montana seniors and middle-class savers will also get hit.
In the United States, seniors and middle-income Americans rely on dividend payments more than any other groups. According to one analysis, 27 million taxpayers reported that they received qualified dividends in 2018. More than half of these taxpayers had incomes of less than $100,000. Sixty-percent were older than 55.
Though most of these seniors will be spared a direct tax increase under the proposal in Congress, they will still feel the impact of the tax in their wallets. This is because there is an inverse relationship between dividend taxes and dividend payments. Throughout history, when dividend taxes have gone down, dividend payments have surged. The fear today is that raising taxes on dividends, even just for high earners, will result in fewer dividend payments for the millions of seniors who depend on them.
With inflation rising and the economy still uncertain, this is the wrong time to put seniors’ dividend payments at risk.
I know balancing budgets is never easy. I believe it’s fine, ideal even, for Congress to ask the wealthy to give a little more, but care should be taken so that Montana farmers, ranchers, seniors and savers are left alone.
After serving Carbon County, Montana for 28 years, John Prinkki is happily retired and enjoying time in the region he calls home.
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