In Fiscal Year (FY) 2011, Montana collected $3.4 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 the charts below, Montana’s state and local tax burden (tax collections divided by personal income) was the fifteenth lowest in the nation for FY 2011 at 9.7 percent—or 7.3 percent below the national average of 10.5 percent. Montana’s tax burden has increased over time by a modest 22.3 percent to 9.7 percent in FY 2011 from 7.9 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 (3.8 percent, 7th highest).
Montana levies a coal severance tax (pdf) which raised $52.8 million in FY 2012—half of the revenue goes into the General Fund and 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.
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.