In Fiscal Year (FY) 2013, Montana collected $3.8 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Montana taxpayer can afford this level of taxation.
As shown in Chart 1 below, Montana’s state and local tax burden (tax collections divided by personal income) was the eighteenth lowest in the nation for FY 2013 at 9.7 percent—this is -6 percent below the national average of 10.3 percent. As shown in Chart 2, Montana’s tax burden has increased over time by 24 percent to 9.7 percent in FY 2013 from 7.8 percent in FY 1950.
Montana’s low state and local tax burden is driven by the fact that it does not have a state sales tax. Of course, Montana can essentially pay for not having the sales tax because of money stemming from natural resource extraction—all other taxes are significantly higher than the national average (3.2 percent, 7th highest).
Montana levies a coal severance tax (pdf) which raised $56.6 million in FY 2013—half of the revenue goes into the General Fund and other funds while the other half goes into the Coal Severance Tax Trust Fund. In FY 2012, the Trust Fund had assets worth nearly $900 million. The interest on the Trust Fund goes to fund numerous programs in education, infrastructure, and economic development.
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Montana—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The Montana counties with the highest local government tax burden include: Carter County, MT (6.8 percent), McCone County, MT (6.6 percent), and Powder River County, MT (6.5 percent). The Montana counties with the lowest local government tax burden include: Richland County, MT (1.4 percent), Jefferson County, MT (2.2 percent), and Custer County, MT (2.2 percent).
J. Scott Moody has nearly 20 years experience as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as the American Conservative Union Foundation, Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.