You can tell a lot about what a nation values by looking at how it taxes different groups of people; are the rich favored over the middle class, for instance, or vice versa?
You can also tell a lot about what group of people a candidate for office will represent by looking at his or her past stands on issues. Looking at U.S. House candidate Greg Gianforte’s past actions on Montana tax legislation, it appears he is most concerned with representing a small, select group of taxpayers, including himself.
I base this statement on my experience over a six-year period on the Senate Taxation Committee, where I watched Gianforte promote a special capital gains tax rate for shareholders, himself among them, in a small, albeit important sector of Montana’s economy, at the expense of other taxpayers across the state.
Capital gains are simply the profits from the sale of property, real estate or company stock. They are usually taxed at a lower rate than ordinary, ongoing income like wages. This is because the income from capital gains is generally a one-time event and can involve large sums of taxable income.
However, until 2005 in Montana, capital gains were treated in the same way as ordinary income and taxed at the same rate. Most taxpayers claiming capital gains are in the top 10 percent income bracket.
In the 2003 legislative session, Senate Bill 463, titled “Reduce Capital Gains for Employee Owned Stock,” was introduced by Sen. Jerry Black. Its purpose was to give special tax treatment to a select group of taxpayers who held stock in certain Montana-based companies. It proposed to set the tax rate on capital gains for those taxpayers at 2 percent. It left all other taxpayers with capital gains from selling a ranch or selling stock in non-Montana-based companies at 11 percent.
The minutes from that meeting record that “Mr. Gianforte said that if we want the state to be receptive to high tech, the council might want to consider some kind of targeted capital gains incentive for businesses that are started to create high-wage jobs.” It was also at this meeting that he proposed replacing the income tax with a sales tax.
SB 463 did not pass, but SB 407, the result of the work done by the Income Tax Task Force, did, and it included special treatment for capital gains of all types, not just special interests. It provided a 2 percent credit against capital gains, and at the same time lowered Montana’s top marginal rate from 11 percent to 6.9 percent. Thus, if a taxpayer’s income taxes were assessed at a 6.9 percent rate, any capital gains in that income would be taxed a 4.9 percent rate—2 percent lower.
In 2005 ,Sen. Black requested two bill drafts similar to SB 463, but did not introduce them. In 2007, Sen. Gary Perry introduced SB 494, which again proposed a 2 percent tax rate on employee-owned stock of certain Montana corporations.
Gianforte again supported the bill. This time, however, the 2 percent capital gains credit enacted in SB 407 would offset the proposed 2 percent tax rate and the resulting tax rate on capital gains for this select group of taxpayers would be zero—a fact which Gianforte knew full well, but never mentioned in his testimony. Fortunately, SB 494 did not pass.
In short, Gianforte’s effort to eliminate capital gains taxes for a small group of people would also eliminate his capital gains taxes if and when he sold his shares in RightNow Technologies. In 2012, RightNow was sold to Oracle for $1.8 billion.
This kind of self-serving behavior is troubling in an influential citizen; it is more than troubling when that citizen becomes an elected official more concerned with his personal benefit than the benefit of those he represents.
You can listen to the testimony on SB 463 here, beginning at minute 19. Of particular interest is Sen. Story’s question to Gianforte at about minute 55.
Jim Elliott is a former chairman of the Montana Democratic Party and a former state senator from Trout Creek.