FAL

Montana has the fairest tax system among all 50 states in the nation, a study by WalletHub concluded recently.

That may surprise Montanans who are preparing to write checks for first-half property taxes this fall, or for self-employed people making quarterly income tax payments to the state this month.

Even so, a key reason for Montana's No. 1 ranking in the study is it has no general sales tax. That fact also helped the states of Delaware and Oregon, also among only five states lacking a sales tax, to reach the top five states in tax fairness.

The idea is a sales tax hits low-income people in the same way it hits Montana's wealthiest residents — everyone pays the same rate, regardless of income. WalletHub researchers polled Americans on what they thought was fair and unfair in the tax system, and both liberal and conservative people quizzed considered sales taxes to be unfair.

Two experts we talked to about Montana's ranking did not exactly jump for joy discussing it, but they didn't offer major objections.

"We don't have a sales tax, so that gave us a leg up," said Raymond Young, Great Falls certified public accountant. "I think our tax system is reasonably fair, but to say ours is the fairest one of all might be a stretch. They're mainly thinking about individuals and businesses and what taxes they pay."

Bob Story, executive director of the Montana Taxpayers Association in Helena, said property taxes are even more regressive than the sales tax, which in many states has exemptions for food and other necessities.

"You have to pay property taxes whether you have any income (or not)," Story said Tuesday.

Story wasn't upset by the WalletHub study.

"Montana ranks pretty high on a lot of different surveys," including those by the Tax Foundation on business climate, Story said. Both Story and Young said rankings can vary based on what the study focuses on. For example, WalletHub did a study examining the best and worst states in which to be a taxpayer, and Montana only ranked 19th in that one.

Each man had a point to make about Montana's income tax. Young, for example, said it doesn't take long for a middle-class Montanan to get hit by the state's rapidly escalating tax brackets, and even end up at the top bracket of 6.9 percent.

"The average person in Montana doesn't make a lot of money," Story added.

At the same time, Story said 55 percent of income taxes in Montana comes from the top 10 percent of state taxpayers, and 72 percent from the top 20 percent, often hitting people trying to create more jobs in the state.

"Nobody thinks that the tax they pay is fair," Story noted.

We're pleased to see Montana is ranked highly for tax fairness, even if there might be instances where tweaking would be worthwhile.

"Our view is that we have a pretty decent tax situation," Story said.

Young observed that a big reason for Montana's state budget stability is the energy boom in eastern Montana.

"When somebody turns off the oil spigot, then we'll have a problem," Young said.

Story does not expect big tax issues to emerge in the 2015 Legislature, although he said there may be proposals to simplify Montana's income tax, legislation on property reappraisal, and to reduce the state tax on pollution control equipment. Pollution control devices now are taxed at a higher rate than other business equipment, when in the past the opposite was true, Story said.

It's a tricky balancing act, but it's good that, at least for now, Montana is being viewed favorably for its tax structure.

"You kind of have to have a mix of taxes," Story observed.

That sounds reasonable to us.

— Tribune editorial board

Weigh in

Is Montana's tax system fairest? See today's question on Page 1M or vote at gftrib.com.