Tax credit for working poor gains House’s OK

By CHARLES S. JOHNSON
With bipartisan support, the Montana House Wednesday tentatively approved a tax credit aimed at poor, working families. It marks the first time a bill providing a state earned income tax credit has passed a Montana legislative chamber.

House Bill 360, by Rep. Mary Caferro, D-Helena, won debate-stage approval by 65-35. It was sent to the House Appropriations Committee for review because of its estimated cost of $27.5 million a year, starting in fiscal 2010. Caferro pegged the cost at $24 million.

The bill still needs one more vote in the House before moving to the Senate.

Caferro called HB360 both “a tax cut for the working families of Montana” and an economic stimulus. It increases the number of people working, she said, and reduces the number on public assistance.

She disagreed with claims that now is not the right time to take up the bill, saying: “This is exactly the right time to do it.”
Recipients will spend the tax savings in their communities on anything from washing machines to school clothes for their children, Caferro said.

“I hope they don’t have to stand in the welfare line and they can (instead) stand in the grocery line and spend it as they see fit,” she said.

Here’s how it would work:

About 74,500 Montana taxpayers claimed the federal earned income tax credit in 2006, an analysis by the governor’s budget office said. The Montana Budget and Policy Center, a nonprofit group, estimates the federal credit will bring $135 million to Montana this year.

HB360 would provide a refundable credit against qualified taxpayers’ state income taxes equal to 20 percent of their federal earned income tax credit. A tax credit is a dollar-for-dollar reduction of someone’s taxes.

Caferro said it should provide a $24 million annual tax break, with a maximum credit of $943 for a family with a single parent with two children. The average credit would be $368.

“I love this bill,” said Rep. Brian Hoven, R-Great Falls. “It does what all Republicans like. It rewards work.”

He continued, “It’s very expensive. I don’t know where the money is coming from. But I also know people are more important than highways.”

Rep. Dave Kasten, R-Brockway, called the bill “a good idea” and added: “I’m going to do everything I can to get this bill passed.” He asked for its backers to help him find $24 million in other budget cuts to pay for the credit.

Although the federal tax credit is “quite successful,” Rep. Bob Lake, R-Hamilton, said the state cannot afford HB360. He predicted the bill “will probably meet its demise” in the Appropriations Committee.

Rep. Mike Miller, R-Helmville, said HB360 would just allow small businesses to cut wages because the workers would get the state income tax credit.

Democratic legislators defended the bill.

“I think this is really about Montana families surviving now,” said Rep. Diane Sands, D-Missoula.

Rep. Julie French, D-Scobey, estimated that 65 percent of the federal credit now goes to rural Montana residents. The state credit would be distributed they same way.