A primer on Montana taxes.

• Author: Young, Douglas J.

Taxes are the subject of perennial debate in Montana. The charts in this article are intended to provide a factual basis for discussing the state's tax system. How has the economy--and thus the tax base--changed in the last quarter century? What are the principal sources of government revenues and how have they changed over time? How do Montana's taxes compare with other states? Why have taxes on residential property been rising so rapidly? How have declining natural resource markets affected Montana's taxes? These questions and more are answered in the charts below.

The Changing Tax Base

* Montanans today receive more of their income from government transfers (such as Social Security), interest, dividends and rents, and service sector jobs.

* Montanans receive a smaller share of income from farms and other Jobs.

* Since government transfers are lightly taxed, taxable income has shrunk as a percentage of personal income.

[Figure 1 ILLUSTRATION OMITTED]

Government Revenue Sources in Montana

* About half of Montana's government revenues come from taxes.

* About one-fourth come from user fees such as tuition and from miscellaneous revenues such as interest.

* About one-fourth come from federal aid such as highway funds.

* Taxes take a smaller share of income than in 1970, while user fees and miscellaneous revenues have increased.

[Figure 2 ILLUSTRATION OMITTED]

Government Revenue Sources

* Montana governments receive a smaller share of their revenues from sales and excise taxes such as gasoline and tobacco than the national average.

* Montana governments rely more on federal aid such as highway funds and welfare payments than the national average. This dependence makes Montana vulnerable to reductions in payments from Washington DC.

[Figure 3 ILLUSTRATION OMITTED]

Montana Taxes

As percent of personal income:

* Income taxes have risen slightly.

* Property taxes have declined.

* Total taxes have declined.

* Total taxes including contributions for social insurance (workman's compensation and unemployment insurance) have declined slightly.

[Figure 4 ILLUSTRATION OMITTED]

The Changing Property Tax Base

* Natural resources have fallen dramatically as a percent of total taxable value. About half of the decline is attributable to the end of the energy crisis, and about half to changes in law.

* The property tax burden has shifted to other property, especially residential.

[Figure 5 ILLUSTRATION OMITTED]

The Rise and Fall of Natural Resource Taxes

* In 1973 resources contributed only a small amount to our total taxes.

* By 1983, resource taxes amounted to almost one-fourth of total taxes.

* By 1993, resource taxes had fallen back to a smaller percentage.

* While total taxes have declined relative to income in the last decade, non-resource taxes (which are the taxes most Montanans pay) have actually risen.

[Figure 6 ILLUSTRATION OMITTED]

Property Tax Base and Rates

* Montana has above average amounts of farm and utility property.

* Tax rates are above average on business equipment and utility property.

* Tax rates are near average on residential and farm properties.

[Figure 7 ILLUSTRATION OMITTED]

How High Are Montana's Taxes?

* 37th in the nation on a per capita basis.

* Montana's taxes rank 21st as a percentage of income.

Figure 8 How High Are Montana's Taxes? State and Local Taxes - Fiscal Year 1992

...