Early outlook at Montana’s tax revenue is promising

But a state budget analyst said it’s too soon to draw final conclusions

By: - November 9, 2021 7:37 pm

(Illustration by Getty Images)

A budget analyst with Legislative Services Division told a promising story to the Revenue Interim Committee on Tuesday about Montana’s new fiscal year but cautioned that’s it is still early.

“Long story short, only four months of data, but two that play a very big role in how strong the general fund is at the close of the fiscal year is our two income taxes, individual and corporate,” said state budget analyst Sam Schafer. “They are quite a bit above last year, which was already a very, very strong year.”

Compared to this time last year, individual and corporate tax income are 12.5 percent and 37.4 percent higher, respectively, according to a report outlining the state’s general revenue.  Not included in the general fund at this point in the fiscal year are things like property tax, which is a $350 million source, as well as oil and natural gas taxes, Schafer said.

Schafer acknowledged the strong growth but said, “it is extremely, extremely early to make predictions about final collections.” However, he did venture out to say that he believes the state will end up above the Legislature’s official revenue estimate outlined in House Joint Resolution 2. “To hit HJ 2 right now, we have to go down 10.8% across all general fund sources.”

Regarding the boost in the amount of income tax collected, Schafer attributed the 12.5 percent increase largely to higher wages. “When you look at traditional patterns of withholding growth and wage growth, right next to each other, they certainly follow each other pretty darn closely.”

He also said he doesn’t expect the corporate tax growth to slow down and attributed a good portion of the growth to the banks and real estate sectors.

“Corporate income taxes continue to be just sky-high … And so far, there’s no indication that it’s not going to continue to be strong,” he said.

Schafer also pointed out that the last fiscal year ended on June 30, 2021, and was inflated by 2020 income tax filings that the state allowed to be extended because of the coronavirus pandemic.

“So if you remove that payment, then estimated payments are up in an apples-to-apples comparison about 20% compared to last year,” he said.

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Keith Schubert
Keith Schubert

Keith Schubert is a reporter for the Daily Montanan. Keith was born and raised in Wisconsin and graduated from the University of Minnesota in 2019. He has worked at the St.Paul Pioneer Press, Milwaukee Journal Sentinel and most recently, the Asbury Park Press, covering everything from local craft fairs to crime and courts to municipal government to the Minnesota state legislature. In his free time, he enjoys cheering on Wisconsin sports teams and exploring small businesses. He can be reached by text or call at 406-475-2954 .