Sales Tax Considered In Montana
By Tim Ravndal
Montana Legislature meets every two years. The 2019 legislative session has reached the half way point with 1060 pieces of legislation having been introduced for consideration. Many people of Montana are wondering how things get done. It is said that the legislature is a sausage making machine and this session perhaps qualifies as a model.
The effort to bring a sales tax to Montana has been resoundingly rejected multiple times over the years. A campaign slogan back in the late 1960’s: “Pay More…What For” was used by Gubernatorial Candidate Forest Anderson. His opposition to a sales tax resulted in a landslide victory against incumbent Tim Babcock. A sales tax in Montana continues to be a political hot potato.
Multiple attempts at introducing a sales tax have been made in Montana. Each time, the people have said no!
This year Representative Kerry White, House District 64 from Bozeman, introduced HB300. The bill is an expansive revision of Montana taxation laws. The new law if enacted will amend over 340 existing laws and repeal approximately 310 laws.
The legislation as introduced is 426 pages that works to explain how the tax will be implemented and administered by the State of Montana. Between the two houses, Montana’s 150 representatives will need to review and debate the bill in the short 90 day legislative session. The expansive bill is part of HB2 that sets the Montana general budget for the next fiscal cycle.
The bill has a proposal that would provide the people of Montana the month of November as a vacation from the provisions of the tax. It is said that this provision is inserted into the law to offset the opposition brought forward by small business owners that are voicing their concerns over the loss of business.
Montana Constitution, as amended in 1972, provides for up to a 4% sales tax. the bill opens the door with a 2.5% tax that will go into effect on January 1, 2020. In reviewing the history of a sales tax in other states, the rate has continually been adjusted upward as infrastructure costs increase. Nationally the Tax Foundation put out a report in January 2019 on 45 states and the District of Columbia that are currently assessing a sales tax.
Many of the citizens of Montana that we asked are cautious to endorse the idea. It is said that if the legislation eliminates the property taxes in Montana then they would then and only then support the new sales tax. If property taxes are not totally eliminated they are in full opposition to the sales tax.
Revenue for Montana schools has been under stress due to the loss of federal funding including the Secure Rural Schools Act that has been done away with. With administration costs continually increasing in public education new funding sources are in high demand. School funding would see a segment of the sales tax help fund public education at the state level.
Impact to local government is not fully addressed but there are technological problems identified in the fiscal note. Local government implementation of the sales tax as well as administration of the revenues generated will increase demand on local government across the board.
The State of Montana will create a new 5 member commission to administer the sales tax. The commission will be elected, but an initial appointment may be necessary due to the effective date of the law if passed. That would provide for the current governor to fill the initial board with his choices. Initially the state government will require an increase of 35 new full time employees to administer the program. Multiple legislators voice concern in the projected increase in cost going to government program administration.
Citizens also voiced their concern that there are many resident and non-resident citizens that do not contribute and should be brought into the tax schedule to be fair for everyone. However low income families in Montana will be severely impacted by the sales tax. Senior citizens also on limited income will see an impact that has not been fully analyzed.
There is a recent push among many communities in Montana to capture additional revenue by enacting a local option sales tax. This action may be triggered by designating a tourism dependent community. The local option includes but is not limited to a bed tax and can be enacted by local government officials. It appears that although the Constitution limits the state at 4%, local communities are not limited by that provision.
Representative White has put a huge amount of work into HB300 and hopes to see support from the people of Montana. The bill was heard in the House judiciary committee where the process brought forward a revised 20 page fiscal note on the bill. The fiscal note provides a summary of the known and perceived impacts to the State of Montana.
Many legislators are voicing concern over full understanding of the short and long term impacts on the people. The bill was first heard on February 6th and is still in the House Taxation Committee where it is being analyzed. The legislative process requires the bill to be transmitted out of the house by April 1, 2019. The Montana Senate will then have until April 16, 2019 to review the bill and add amendments for consideration.
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