Despite sparing 88 percent of Montana companies from paying property taxes on their business equipment, industry groups lined up Tuesday against a Schweitzer administration-backed plan to quit levying taxes on equipment worth $150,000 or less.

Rep. Jill Cohenour, D-Helena, said her bill, House Bill 649, is intended to "stabilize small businesses" in these difficult economic times.

Her bill is one of a several bills aimed at reducing this tax on businesses.

Business equipment is what is used by firms to produce their goods. For a bakery, it would be ovens, mixers and similar equipment. For a farm, it would be tractors and combines.

Business groups opposed the bill for two reasons.

Jon Bennion of the Montana Chamber of Commerce said the group prefers an exemption instead of the threshold in the bill.

Here's the difference:

Under a threshold, if HB649 passes and a company had $151,000 worth of business equipment, it would have to pay the property tax on all $151,000 of it.

Under an exemption, however, the company would have to pay taxes on only $1,000 (the value of $151,000 minus the $150,000 exemption).

The current threshold is $20,000.

Business groups also criticized the bill because it's tied to the passage of four tax bills that the Schweitzer administration has been pushing for unsuccessfully since 2005. These are aimed at cracking down on out-of-state businesses and individuals the Revenue Department says are not paying the taxes they should to the state of Montana. It's also tied to one item in the budget.

Money raised by these tax-collection bills would reimburse local governments for the loss of property-tax revenue they would lose from on business equipment they would lose.

"We do not believe you should hold Montana businesses hostages to some of these bad tax bills," Bennion said.

Barry "Spook" Stang of the Montana Motor Carriers Association criticized tying it to passage of other bills.

"They need to stand on their own," Stang said of the Revenue Department's tax-collection bills.

Joining them in opposition was Bob Decker of the Policy Group, a nonprofit group usually not aligned with business groups.

"We've cut 70 percent from business equipment taxes (since the 1970s), and I think that's enough," he said.

Cohenour said her bill would make Montana's small businesses more competitive, simplify property-tax administration and help the trust between the state and local governments because of the full revenue reimbursement.

Under the bill and the $150,000 threshold, 26,795 small businesses would not have to pay property taxes on their business equipment or 88 percent. That's up from 12,468 or 42 percent under the $20,000 threshold passed in 2005.

Eric Stern, an adviser to Gov. Brian Schweitzer, defended the threshold approach as an alternative to further reducing the tax rates. The tax rate on business equipment has been lowered from at least 12 percent in 1989 to the current 3 percent rate.

"Rate reductions tend to help the Exxons and the Conocos," Stern said. "Threshold-raising tends to help these small businesses."

Revenue Director Dan Bucks said the question becomes who pays for increasing the threshold to reimburse local governments for the lost tax revenue. He advocated going after the out-of-state companies and people not paying the taxes they owe.

The House Taxation Committee didn't vote on HB649 Tuesday.