The Tax Foundation

Research Areas

Montana

The Facts on Montana’s Tax Climate

Here are some basic facts on Montana’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 8th in Montana
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Montana taxpayers had to work until April 8th (ranked 48th nationally) to pay their total tax bill, over two weeks earlier than national Tax Freedom Day (April 23). Neighboring states' Tax Freedom Days are as follows: Idaho, April 20 (ranked 19th); Wyoming, April 20 (ranked 21st); North Dakota, April 12 (ranked 39th), and South Dakota, April 12 (ranked 41st).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Montana's State/Local Tax Burden Well Below National Average
Estimated at 8.6% of income, Montana's state and local tax burden percentage ranks 40th nationally, well below the national average of 9.7%. Montana taxpayers pay $3,158 per capita in state and local taxes.  Montana has dropped 22 places since 1977, primarily by maintaining a zero rate on general sales.
Montana's State-Local Tax Burden, 1977-Present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008

Montana's 2008 Business Tax Climate Ranks 6th
Montana ranks 6th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Idaho (31st), Wyoming (1st), North Dakota (30th), and South Dakota (2nd).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Montana's Individual Income Tax System
Montana's personal income tax system consists of seven separate brackets with a top rate of 6.9%, kicking in at an income level of $14,899. That rate ranks Montana 15th highest, among states levying an individual income tax. Montana's 2005 individual income tax collections were $763 per person, which ranked 26th highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Montana's Corporate Income Tax System
Montana's corporate tax structure consists of a flat rate of 6.75% on all corporate income. Among states levying corporate income taxes, Montana's rate ranks 28th highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) were $162.68 per capita, which ranked the state 18th highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Montana Levies No Sales Tax; Gasoline and Cigarette Taxes among the Highest in the Nation
Montana levies no general sales or use tax on consumers, joining Delaware, Alaska, New Hampshire and Oregon as the only states with no general sales tax. Montana's gasoline tax stands at 27.75 cents per gallon, which ranks 18th highest nationally. Montana's cigarette tax stands at $1.70 per pack of twenty, ranking 13th highest nationally. The gasoline tax was adopted in 1921 and the cigarette tax in 1947.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Montana Property Taxes: Comparatively Modest
Montana is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Montana's localities collected $774,842,000 in property taxes in fiscal year 2004, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, however, unlike most other states, Montana collects substantial property taxes: $183,937,000 during FY 2002. That brings its combined state/local property tax collections to $958,779,000, or $1034 per capita, ranking 20th nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Montana is a Beneficiary State
Montana taxpayers receive more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of federal tax collected in 2005, Montana citizens received approximately $1.47 in the way of federal spending. This ranks the state 11th highest nationally and represents a rise from 1995 when Montana received $1.46 per dollar of taxes in federal spending (6th highest nationally). Neighboring states and the amount of federal spending received per dollar of federal tax collected are: Idaho ($1.21), Wyoming ($1.11), North Dakota ($1.68), and South Dakota ($1.53).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Articles from the Tax Foundation