Bill to End Some Property Tax, Add Sales Tax Gets Mixed Review

Feb 07, 2019

Great Falls Tribune

A 426-page bill that would cut some property taxes, create a statewide sales taxes and shutter Department of Revenue offices in Montana counties was heard Wednesday by a state panel in which some opponents said there should be a discussion on Montana’s tax structure instead.

House Bill 300 by Rep. Kerry White, R-Bozeman, would end property taxes for residents, agriculture and timberlands and start a 2.5 percent sales tax.

White said those three categories generated $1.26 billion in revenues for the state. Under his plan the sales tax would bring in $1.6 billion. He said it would also pump $200 million into infrastructure projects.

White, who said he and state staff have been working on the bill since August, told the House Taxation Committee the bill would also close property tax offices in counties, thereby saving the state about $26 million.

He said later he began thinking about such a bill when he served in the 2015 session and people said they were losing homes because their property taxes had increased 300 percent.

The bill includes a sales “tax vacation” from Oct. 20-Nov. 20, in which residents would not have to pay sales tax on purchases, White said, noting it was timed to fall in between summer and winter tourist seasons.

White said the fiscal note for the bill was still being worked on.

The bill also calls for a “critical needs assessment” commissions to be set up to consider the state's existing and projected funding for infrastructure projects. And it has the revenue and transportation interim committee review the statewide general sales, evaluate whether the general sales and use tax has reduced taxes and propose legislation.

White noted that food under the federal Supplemental Nutrition Assistance Program would be exempt, as is medical care. He said the bill will pick on on sale tax generated by internet transactions.

Those opposed to the bill said Montana needs to have a discussion on its tax structure, citing a November 2017 special session in which lawmakers had to meet to resolve budget issues due partly to dwindling revenues.

The Montana Budget and Policy Center said Montana’s tax system is regressive, meaning families living on low- and middle-incomes pay a higher share of their income on taxes than the wealthy. They said HB 300 would increase the taxes paid by those families while decreasing the taxes paid by the wealthy.

They said it would result in a loss of state revenue and investments like public education, infrastructure and public health programs would be cut.

Heather O'Loughlin, co-director of the nonprofit organization that provides analysis on budget, tax and economic issues, said the state "deserves" an honest conversation about revenue and revenue sources, "but we do not think this is the right direction."

Tim S. Burton, executive director of the Montana League of Cities and Towns, said during the special session and 2017 legislative session there was some talk of looking into Montana’s tax structure, but those discussions ended when revenues picked up.

He said the bill restructures government’s responsibilities and services.

“I don’t think local control is represented in this bill,” he said.

Burton said a committee needed to be created to look into the state’s tax structure; it’s past, present and future.

Gene Walborn, director of the Montana Department of Revenue, and Eric Bryson, executive director of the Montana Association of Counties, agreed.

“It really is time for Montana to look at its tax structure,” Walborn said.

Walborn said he could not close the property tax collection offices by the Dec. 31, 2020, deadline mandated in HB 300.

“It’s a pretty heavy lift,” he said, adding later it would impact about 200 employees.

Bryson said the way the bill is written it has converted local government officials into grant writers and the critical needs panel will always be two years behind in addressing the critical needs of government.

He said there needed to be a discussion about statewide sales tax.

Gov. Steve Bullock offered a sharp rebuke of the sales tax bill in an email.

“I stand with the majority of Montanans who have time and time again rejected a statewide sales tax and against this bill that would raise everyday taxes on hard-working Montanans in our state,” he said, accusing Republicans of wanting to protect wealthy property owners and out-of-state millionaires, while leaving Montana residents with the bill.

Bullock said HB 300 could destabilize school districts and local government funding “and put a giant hole in the state budget.”

The bill received support from fellow Rep. Mark Noland, R-Bigfork, who said getting rid of the property tax would be of benefit to senior citizens and others who struggle to pay.

“I see this as a way to help our people,” he said, later telling the panel “If you dig down deep to what the bill is, you will see this as a relief.”

According to White, the bill sets up a committee of local officials that would review projects

Darryl James, executive director of the Montana Infrastructure Coalition, which championed infrastructure bills and improvements in the last legislative session, said his organization opposed HB 300 as well.

He said Montana taxpayers are experiencing “property tax fatigue.”

James called the bill a “centralized government response to a local government issue.”

The committee took no action Wednesday. White said later he was optimistic the bill would get out of committee, and noted that even those opposed wanted a study done of the state tax structure.

He said he was willing to make changes to the bill.

In the 2017 session, White proposed HB 620, a 414-page bill that would abolish property tax and replace it with a 2 percent sales tax.

The bill eventually died on the floor 18-82. It took legislative staff four months to draft the 414-page bill and one month to do a fiscal note.

Montana Budget & Policy Center

Shaping policy for a stronger Montana.

MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.