Montana's Senate Taxation Committee convened on March 31, 2025, to discuss Senate Bill 538, a proposed tax measure aimed at providing a 20% deduction for pass-through businesses. This bill has sparked significant debate among stakeholders, highlighting the ongoing struggle between supporting small businesses and addressing potential revenue losses for the state.

Proponents of the bill, including Sheridan Hoyer from the Montana Chamber of Commerce, argued that the legislation is essential for leveling the playing field between small businesses and large corporations. Hoyer emphasized that Montana's current tax code does not recognize the federal 199A deduction, which puts local businesses at a disadvantage compared to larger entities that benefit from permanent tax cuts. She urged the committee to pass the bill to support Montana's main street businesses.

Conversely, opponents raised serious concerns about the implications of the proposed deduction. Rose Bender from the Montana Budget and Policy Center argued that the bill disproportionately benefits wealthy individuals and large corporations rather than small businesses. She pointed out that over half of the deduction's benefits would go to households earning over a million dollars annually. Bender also highlighted the potential long-term revenue loss for the state, estimating it could exceed $60 million annually if the deduction is extended at the federal level.

The committee heard from various informational witnesses, including representatives from the Department of Revenue, who were available to answer questions regarding the fiscal implications of the bill. As discussions continue, the committee faces the challenge of balancing the needs of small businesses with the financial health of the state.

The outcome of Senate Bill 538 will have significant implications for Montana's economic landscape, particularly for small businesses striving to compete in an increasingly challenging market. The committee's decision will be closely watched by stakeholders across the state as they await clarity on the future of business taxation in Montana.