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Unpacking Montana’s Proposed 4.7% Flat Income Tax

Montana’s campaign proposal would apply a 4.7% marginal rate to ordinary taxable income, replacing the enacted 2027 rate of 5.4% above filing-status thresholds. Its direct savings and budget effects depend on taxable income, the estimate’s baseline, and lawmakers’ fiscal choices.
From TheFinanceBase Team5 min to read
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Montana’s proposed 4.7% flat income tax is not law in the materials available as of October 11, 2026. Under enacted law, the 2027 rate is 4.7% on ordinary taxable income up to a filing-status threshold and 5.4% above it. The proposal would apply 4.7% at every ordinary-income level, so any direct savings would depend on how much of a taxpayer’s income currently falls above that threshold—not on a 0.7% cut to all income.

What would change—and what is already law?

Governor Greg Gianforte and the Mountain States Policy Center (MSPC) are promoting the proposal as the Flat. Fair. Montana. initiative. The announcement describes a flat individual income-tax rate, but the cited campaign materials do not provide bill text resolving every detail. Treat 4.7% as a proposal, not an enacted rate.

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The relevant comparison is Montana’s enacted ordinary-income schedule for tax year 2027. The Department of Revenue lists 4.7% up to the thresholds below and 5.4% above them. The proposal would remove that upper-rate step under its described design.

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Filing status 2027 threshold Enacted 2027 rate above threshold Proposed rate
Single $65,000 5.4% 4.7%
Head of household $97,500 5.4% 4.7%
Married filing jointly or surviving spouse $130,000 5.4% 4.7%

These are ordinary taxable-income thresholds, not gross-income cutoffs. Montana Code Annotated § 15-30-2103 sets the 2027 rates and provides for inflation adjustment of brackets; the Department of Revenue’s published tax-year figures give the thresholds shown here.

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Why the 2026 schedule is different

For tax year 2026, the Department of Revenue lists thresholds of $47,500 for single filers, $71,250 for head-of-household filers, and $95,000 for joint filers and surviving spouses. The rate above each threshold is 5.65%. Those 2026 figures should not be substituted for the enacted 2027 baseline when estimating the proposal’s effect in 2027.

Other tax provisions are separate questions

Montana has separate 3.0% and 4.1% rates for long-term capital gains. The Department says HB 337 aligns those rates’ thresholds with the ordinary-income ranges. HB 337 also raises the Montana earned income tax credit to 20% of the federal credit starting in tax year 2026. The campaign materials do not establish that the proposed 4.7% rate would change either feature.

How would the proposal affect an individual taxpayer?

A flat marginal rate means one statutory rate applies to ordinary taxable income under the proposal. It does not mean each resident would pay 4.7% of gross income. Adjustments, deductions, credits, and the amount of income that is taxable still matter; as a result, taxpayers would continue to have different effective tax rates.

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Under the described design, the direct rate reduction is 0.7 percentage points on ordinary taxable income above the applicable 2027 threshold. Income below that threshold already faces the 4.7% rate. The examples below are calculations presented in Greg Gilpin’s October 9, 2026, analysis for Montana State University’s AgEconMT, using the 2027 brackets; they are not forecasts for every household.

Filing status and taxable income Estimated direct savings
Single filer, $60,000 $0
Single filer, $100,000 $245
Joint filers, $120,000 $0
Joint filers, $200,000 $490
Joint filers, $1,000,000 $6,090

For example, a single filer with $100,000 in taxable income has $35,000 above the $65,000 threshold; a 0.7-point reduction on that amount equals $245. The calculation concerns taxable income above the threshold, not the filer’s entire income.

Who receives the direct tax savings?

Gilpin’s static estimate uses Montana Department of Revenue data for 2023 full-year-resident returns and the 2027 statutory brackets. It finds that 70% of filers would receive no direct savings, while the top 10% would receive 88% of the total savings; the top 1% alone would receive 46%, a share included within the top 10%. The estimate does not model changes in taxpayer behavior or economic activity.

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The distribution follows from the design: taxpayers whose ordinary taxable income does not exceed their filing-status threshold have no income taxed at the higher 5.4% rate to reduce. Those with more income above the threshold receive a larger direct reduction, all else equal. That describes the distribution of the estimated tax cut, not the full fiscal or economic effects of the proposal.

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How much revenue might the proposal cost?

Published estimates differ partly because they use different baselines and assumptions. Gilpin’s MSU analysis reports the following annual estimates:

Publisher and estimate Annual revenue reduction Baseline or treatment
Legislative Fiscal Division estimate, as reported by Gilpin $130 million Compared with current law, including the scheduled 2027 rate of 5.4% above the threshold
MSPC estimate $130 million MSPC estimate reported by Gilpin
MSPC dynamic estimate including HB 377 $192 million Starts from the 2026 rate of 5.65% and includes assumed economic feedback
MSPC static estimate including HB 377 $210 million Starts from the 2026 rate of 5.65% and does not include behavioral or economic feedback

These figures are not interchangeable estimates of precisely the same comparison: the latter MSPC figures use the 2026 rate as their starting point, while the Legislative Fiscal Division estimate uses the scheduled 2027 rate. The $192 million figure includes assumed feedback; the $210 million figure is static. Gilpin notes that reported revenue-to-GDP shares use 2025 state tax collections and second-quarter 2026 GDP.

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What do the projected economic gains show?

The Governor’s Office announcement of September 8, 2026, reports MSPC projections of about $525 million in additional gross state product, $286 million in wages, more than 2,400 jobs, and nearly $650 in additional annual after-tax income per resident. These are proponents’ projections, not observed results or an official state forecast.

Gilpin’s MSU analysis challenges key assumptions behind those projections. It says the $525 million output estimate follows from multiplying a $210 million estimated tax reduction by 2.5, and argues that multiplier is high for a state-level tax change. It also argues that the nearly $650 per-resident figure uses an overstated cost baseline and adds projected GDP to direct tax savings. The estimates therefore reflect disputed modeling choices as well as the proposed rate change.

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Historical comparisons offer context, but not proof of what the proposal would cause. Gilpin reports the following average annual growth figures for Montana compared with Wyoming and South Dakota:

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Measure and period Montana Wyoming and South Dakota average Difference
Real GDP growth, 2011–2019 1.9% 0.8% Montana +1.1 percentage points
Real GDP growth, 2024–2025 2.3% 1.2% Montana +1.1 percentage points
Employment growth, 2011–2019 1.4% 0.6% Montana +0.8 percentage points
Employment growth, 2024–2025 0.6% 0.7% Montana −0.1 percentage points

This comparison does not identify the effect of Montana’s 2024 tax reform: the states differ, and that reform changed more than the top rate. It cannot establish that a new flat rate would produce the projected growth outcomes.

What could the revenue tradeoff mean for the state budget?

The Legislative Fiscal Division’s June 2026 2029 Biennium Outlook says projected ongoing revenue covers baseline, present-law, and pressure spending in fiscal years 2028 and 2029. It separately identifies additional known pressures—including interest in a flat income tax and school funding—that exceed the slight remaining structural balance and require legislative choices. The outlook’s first finding should not be read as saying every additional pressure is already funded.

A separate Legislative Fiscal Division chart published August 6, 2026, estimates that individual-income-tax changes enacted from 2017 through 2025 could reduce annual collections by $628 million in fiscal year 2028. The chart also projects fiscal-year 2028 collections 85.8% above fiscal-year 2017. The $628 million is a static estimate of the cumulative effect of prior laws, excluding taxpayer or economic responses; it is not the estimated cost of this proposal.

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If the proposed rate reduction lowered receipts, lawmakers would have to weigh it against spending and other revenue pressures. The cited outlook identifies that need for choices but does not specify which programs, taxes, or other budget items would change.

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