The Great Debate About a Tax Rebate

The Great Debate About a Tax Rebate

By K.T.

We are in the calm before the storm — that period between elections and the legislative session. After a sweeping victory in the elections, the Republicans are sharpening their knives to cut already stressed public infrastructure and services. And along the way, they plan to “rebate” much of the current budget surplus to the taxpayers of Montana. How much, (and who gets it) remains to be seen, but count on it happening.

Is there really a Surplus?

So first let’s talk about the budget surplus. While it is true that we have a record surplus, it is not true that it all came from Montana taxpayers.  Plain and simple, much of the money was sent to Montana from the Federal government in the form of Biden’s American Rescue Plan Act (ARPA) and other Covid relief programs for the purpose of providing emergency grants, lending, and investment to hard-hit small businesses so they can rehire and retain workers. And damn little of the money coming from the Federal Government came from Montana taxpayers. For every dollar Montana sends to the Federal Government, it receives $1.47 back.  Interestingly, 7 of the 10 states which pay the least and receive the most from the Federal Government are governed by Republicans, while over 50% of the states which actually send more to the Feds than they get back are governed by Democrats.

Back in August, the right flank of Republican legislators began thumping their chests, demanding a special session to “return the surplus” to Montanans. In promoting the call for a special session, Republican Mark Blasdel said,  “Legislative Republicans are excited to return excess tax money back to the taxpayers who paid it, … What taxpayers need to know at this point is that under Republican leadership, they can look forward to receiving their money back that the state doesn’t need.” Nice rhetoric, but we don’t think they were really talking about sending anything back to the people who live in other states, ones that actually foot the bill for a big part of the surplus.  

Well, the effort to call a special session failed and highlighted the friction between moderate and hard-right Republicans. Republican Representative Llew Jones of Conrad wrote an editorial which ran in papers across the state arguing to use the surplus for long term investments in infrastructure. . .a rare good idea from a Republican. (Here in Great Falls we didn’t see it because the Great Falls Tribune doesn’t run editorials).

The votes of Republican legislators here in Great Falls follow the fault line split between “moderate” and hard-right Republicans. Supporters of a tax rebate special session included: Lola Galloway, Stephen Galloway, Scot Kerns, Steve Gist, and Jeremy Trebas. Opponents included Wendy McKamey, Steve Fitzpatrick, Ed Buttrey, Fred Anderson and Brian Hoven. (Democrat Carlie Boland voted no and Democrat Tom Jacobson did not respond to the Secretary of State’s poll).  

Check the poll here:

Is this “refund” even legal?

But let’s get back the idea of giving tax rebates at the state level using ARPA funds from the federal government. Stated simply, it violates the spirit and the letter of the law. ARPA specifically prohibits states using the funding for tax rebates. Seems those wiley Federal bureaucrats anticipated that some states would try to put the money in wealthy people’s pockets rather than use it to stimulate their economies by putting dollars to work providing street level services and money for investment to deal with the economic havoc caused by the pandemic. 

So in the up-coming session the war of wiggle words will begin. The Republican party is so wedded to the failed idea of “trickle down economics” that they can’t see, or don’t care about, the reality that giving tax breaks to wealthy people simply does not do much to stimulate the economy. Instead it goes into fancy financial vehicles and things like stock buybacks which actually move money out of the community. And given that Republicans in Montana have consistently passed legislation that is unconstitutional or in violation of existing Federal law we can bet that they will go ahead with their plan no matter what.

The Real Cost

So we just want to leave this with a final thought.  Cascade County just passed a public safety levy.  We’ll see property tax increases from that. The City of Great Falls is about to put their own public safety levy on the ballot. High end estimates of the property tax increase of a City safety levy will double the city’s budget and result in a 191% increase in city property tax bills.

State tax cuts and rebate programs often result in increased local government spending on vital services such as police, fire, facility maintenance, roads, streets, and schools. And if the local mill levies fail, the quality of the community suffers. Schools can’t hire teachers, public safety suffers, streets get potholes and VIOLA! No one wants to live here. And ironically, Republicans justify this snowballing deterioration of our community infrastructure in the name of “economic development.”