One of Gov. Steve Bullock’s longest-serving cabinet members, state Revenue Director Mike Kadas, is retiring next month, closing out a political and public-service career that spans four decades.
Kadas, 61, departs an agency where he helped speed the transition to electronic tax filing, settle some large commercial property-tax disputes and switch property-tax assessment to a two-year appraisal cycle, rather than every six years.
But he also leaves behind a state tax structure he says isn’t raising enough revenue to fund necessary services for Montana – and that he regrets the administration hasn’t been able to change.
“Our overall tax base has been pretty stagnant for the last couple of years, and there’s some reasons for that,” Kadas told MTN News in a recent interview. “We’ve tried some things that fell short, but I think that’s something that is really going to have to happen here, in the near future.”
Kadas, a former Democratic state legislator and mayor of Missoula, was one of Bullock’s first appointees, named state Revenue director in December 2012, several weeks after the governor won election to his first term.
Kadas says he believes state income taxes should require more from Montana’s wealthiest citizens, with a higher rate on top income and elimination of part or all of the state’s tax break on capital gains.
In Montana, all income over about $20,000 is taxed at the same rate, and those with capital gains income – profits from the sale of stocks or businesses – get to reduce their income taxes by 2 percent of their capital gains.
Kadas says the latter credit can end up reducing one’s state income taxes by 25 percent.
“So, you pay more if you go out and work, than you would if you just earned income by selling your stocks,” he says. “That’s not fair to me. That’s the biggest loophole that I would really like to see closed.”
He also says a higher tax rate should be enacted on upper incomes, such as earned income over $500,000.
Yet Republicans, who have controlled the Legislature for most of the past two-and-a-half decades in Montana, have blocked any attempt to reduce the capital-gains credit or impose a higher tax rate on the wealthy.
Rep. Jeff Essmann of Billings, the Republican chairman of the House Taxation Committee, says he agrees that a “day of reckoning” is probably coming for Montana’s tax system.
But he says the revenue problem isn’t because of low tax rates on the wealthy – it’s more because of the gradual elimination of good-paying jobs in natural-resource industries like timber and mining, hurt by environmental policies and regulations.
Essmann also says another reason the state is short on revenue is because Democratic administrations have added more government programs and spending in the past decade.
“You can’t continue to grow government at a faster rate than the economy, or you’re going to run out of other people’s money,” he told MTN News. “And Gov. Bullock is running out of other people’s money.”
Despite the policy differences, Essmann says he respects the job Kadas has done at the Department of Revenue, especially in the area of trying to settle some major property-tax disputes.
“I found him to be engaging and honest, and if we brought an issue to him, I think he attempted to address it,” Essmann says.
Under Kadas, the agency settled several disputes with telecommunication firms, which had tied up tens of millions of dollars of property taxes as they appealed their property valuations.
Verizon Wireless settled in 2014, agreeing to pay $22 million for tax years 2009-2013, instead of the $47 million initially charged by the state, and cleared the way for the company to pay taxes in the future without protests.
The state reached similar settlements on property owned by AT&T Mobility and Alltel Wireless, worth $8 million.
Kadas says the Revenue Department also has settled several big cases involving property taxation of oil refineries and pipelines – although some are still in litigation.
The State Tax Appeal Board is considering a multimillion-dollar case involving the CHS refinery in Laurel and the Montana Supreme Court will decide a case on natural gas pipelines.
Kadas will remain as head of the department through May 11.
In a statement, Bullock said Kadas has “made a meaningful impact on our state,” and that “I’ve always admired his intellect, his leadership and his thoughtful manner.”
The governor said he’ll name a new revenue director in the coming weeks.
Kadas, a former carpenter who earned a bachelor’s and master’s degree in economics from the University of Montana, says he plans to return to Missoula and help his son fix up a new house, among other things.
Kadas served as a state representative from Missoula from 1983-1996 and mayor of Missoula from 1996-2006. He also worked at a company that produces biodegradable chemicals.
Kadas says he’s been impressed by the professionalism of the Department of Revenue and the commitment of its staff to treating all taxpayers fairly and honestly.
“Those things can sometimes be hard, particularly if someone is angry at you or feels that you messed up, and we do occasionally,” he says. “We’re not perfect all the time. … You can’t be perfect, and if you don’t get it right, let’s try to make it right.”