Report: Many new Montana taxpayers came from California and had higher incomes | State and Region


To the surprise of the few who live here, Montana has seen a surge of high-income, out-of-state newcomers leave places like California, Washington and Colorado in 2020 and 2021.

“When you look at average income levels, people who come here have more money on average,” Sam Schaefer, senior tax analyst for Montana’s legislative tax division, said during a presentation to state lawmakers this week. week.

“The data doesn’t suggest that; it is objectively true,” he said. “Average adjusted federal gross income levels are higher for those who come here than for settled people.

A chart showing the average federal adjusted gross income of Montana residents versus new residents.

state of montana

There were 18,077 new filers who moved to Montana in 2020 and declared their residency, compared to 11,416 filers who moved, for a net gain of 6,661 new filers. That’s a big increase from pre-pandemic years, Schaefer noted.

Prior to 2019, Montana’s population was growing about 0.9% each year. This number increased to 1.1% in 2020 and 1.6% in 2021.

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“Things have really taken off in 2021,” he said.

Using tax return data, by far the highest number of new taxpayers, about 2,500, were from California. This was followed by about 2,200 from Washington and 1,500 from Colorado, with about 1,000 each coming from Oregon, Idaho, Texas and Arizona.

“Kind of what we believe to be true, seems to be the case,” Schaefer said, referring to anecdotal evidence suggesting large numbers of Californians come here.

Missoula County saw the third-highest number of new taxpayers at 2,083, behind only Gallatin and Flathead counties.

Montana resident first-time filers in 2020 had an average federal adjusted gross income of $110,271. That’s 34% more than the average income of $82,287 earned by Montana residents who lived in the state for all of 2020.

“It’s about $30,000 more for all ages,” Schaefer said. “Why is this happening? Well, the speculation is that there is a significant number of high-income people, or a few high-income people, coming into the state.

The wealthiest 10% of new filers, the top 1,800 earners, had an average income of $600,000 a year. This is almost double the average annual income of $312,759 earned by the wealthiest 10% of residents for the year.

He made his presentation to the Study Committee on Financial Modernization and State Risk Assessment. The reason he looked at the data was to understand the implications of state income tax revenues for years to come as Montana’s population ages.

Schaefer also tracked people who moved to Montana in 2019 and filed taxes for a full year of Montana income in 2020.

Montana taxable income was 10% higher in 2020 for filers who moved to Montana in 2019 compared to 2020 full-year residents.

People of working age, ie those under 65, recorded an average income growth of 5%. People weren’t moving to Montana for lower-paying jobs because the cost of living is lower here than in places like California, Schaefer said. Rather, the data suggests that it is likely that these filers brought their jobs with them or found similar paying jobs in Montana.

The total incomes of new residents included a higher percentage of capital gains and higher incomes than people who already lived here.

“Taxpayers who moved to Montana in 2019 had higher average incomes in 2020 than residents as a whole and this was driven by higher capital gains and wage income,” Schaefer said.

An interesting data point showed that new residents over the age of 65 who moved to Gallatin County had 195% higher average incomes than people who already lived there. However, in Missoula County, new residents over 65 earned 21% less than people who live here.

Dwaine Iverson, a certified public accountant who serves on the committee, wanted to know if the tax cuts enacted by the Republican-led 2021 Montana Legislature had anything to do with pulling people in.

Montana’s top marginal tax rate has been reduced from 6.9% to 6.75%, although about 202,000 of the state’s taxpaying households with incomes below $19,000 will not have got no tax reduction.

“How competitive is our reduction in tariffs to the state of Montana?” He asked. “Does the effect we wanted with these reduced rates pay off?”

Schaefer said it would be hard to tell if people moved here because of the pandemic or because of lower tax rates.

Committee member Bill Mercer, a Billings State representative, said he heard testimony from a state economist at a previous committee meeting that there hadn’t been a huge increase net immigration of people during the pandemic.

“These data are out of line with this observation,” Mercer said.

Schaefer replied that there is definitely an increase in the number of people moving here in 2020 and 2021 compared to previous years.

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