MISSOULA — More than 11 million out-of-state travelers come to Montana every year, yet it is only one of five states in the country with no statewide sales tax.
Proponents of a sales tax say it’s a giant missed opportunity to generate revenue from those tourists. Detractors say it would disproportionately hurt lower-income residents.
A sales tax was one of the many issues brought up by officials with the Montana Chamber of Commerce during a roundtable discussion with business leaders at the Missoula Area Chamber of Commerce last week.
“A sales tax would generate revenue that would be new to Montana because it’s being paid by people from out of state,” explained Montana Chamber President Webb Brown. “And that’s the best tax of all — when somebody else is paying it. We have a little bit of a gas tax and a little bed tax and (tourists) are happy to pay it because it’s so cheap here. We could get some help” from a sales tax.
Brown said that while other industries such as forest products and oil production are declining, tourism in Montana is increasing every year.
“Foreign tourists would gladly pay (a sales tax) because it’s still so cheap here for tourists,” Brown said. “The biggest chunk of visitor spending is on gasoline, so a gas tax would tap more into them. And yet you have truckers and folks who have higher gasoline uses, and that would hurt them. I’m not saying there’s an easy answer but something should be done.”
The problem, Brown said, is that Montanans are “damn proud” about not having a sales tax. There are places like Red Lodge and Whitefish that have a “resort” tax because so many tourists visit them, but his organization believes a statewide tax is the best option because it would eliminate disparity and confusion.
Bridger Mahlum, the government relations director for the Montana Chamber, said that surveys have shown that people are slowly coming around to supporting a statewide sales tax here.
“Because we are having more tourists, people are a little bit more open to it now,” he said. “But that pride is embedded. But a sales tax could provide some property tax relief in some cases.”
Top priorities for 2017
Representatives from the Montana Chamber were in Missoula to discuss their top priorities for the 2017 legislative session and to hear concerns from business owners.
“Gauging statewide perspectives assists us in setting priorities,” Brown said. “We’ve learned the best way to do that is not through phone calls or tracking the news, but to travel the state and hear directly from those invested in the business climate of Montana.”
Brown said the most pressing issues for the chamber in the next legislative session are reducing costs for businesses such as workers compensation insurance and the business equipment tax, getting an infrastructure upgrade bill passed and increasing entrepreneurship.
Montana businesses have some of the highest workers compensation premiums in the country, Brown said. He also said that the American Society of Civil Engineers gave Montana a C-minus for the quality of dams, schools, transportation and waste treatment infrastructure in 2014.
Generating revenue
The sales tax discussion took up a good chunk of time at the meeting, as business leaders talked about ways Montana could generate revenue to pay for things that the state needs.
“It’s going to be a tough session to talk about additional spending,” Brown said.
Dick Barrett, a Democrat from Missoula running for re-election in Montana’s Senate District 45, has spent eight years in the Legislature and was a member of the taxation committee in both the House and the Senate. He said in all his time, there has never been a bill to establish a statewide sales tax introduced. He also said that he is opposed to it, as are many Democrats and labor unions.
“I think traditionally, the opposition from Democrats and labor is because a (sales tax) is quite regressive,” he said. “That is to say, the lower your income, the larger the share of your income you pay in taxes if it’s a sales tax. You can make a sales tax less regressive by making it selective, meaning it only applies to items that are relatively unimportant in the budgets of lower-income households. But as you narrow your tax base you have to raise the tax rate to make the same amount of money.”
A sales tax could become something of a luxury tax if it only applied to things tourists primarily buy, Barrett said.
“We know how those folks spend their money,” he said. “You could specifically tax items on which they spend money like restaurants, bars, hotels, gasoline, ski passes and things like that. You could easily tap into that particular revenue source without having a statewide sales tax.”
However, Barrett said that he feels that is only a good idea in places like Whitefish where resort taxes are already in place. He said any time the idea of a sales tax is raised at the state level, it’s associated with offsetting income or property taxes.
“Occasionally people have favored a sales tax but only if it’s to replace part of those other taxes,” he said. “In other words, it would be used not to raise taxes but to diversify the sources from which tax is collected. There are a variety of arguments made on behalf of that notion but again, resistance to that would be strong, particularly if you used a sales tax to replace income tax. You are replacing a progressive tax with a regressive tax, and that’s the basis for a lot of opposition.”
Mary Windecker, the past president of the Missoula Area Chamber of Commerce, said that Missoulians have a “tax fatigue” on property taxes because of the $158 million worth of schools bonds that past last year and the $42 million parks and trails bond that voters approved in 2014.
“It’s tough, especially on small businesses,” she said. Windecker added that it might be a good idea to diversify the tax revenue sources.
Child care struggles
The discussion then turned to other topics.
Kelly Rosenleaf, the executive director of Childcare Resources in Missoula and a former city council member, said that child care providers across the state are struggling in the state.
“There are 1,100 small child care providers, and there’s probably a lot more than that illegally operating, but we have seen a precipitous drop in them because of the low unemployment rate and the inability of child care businesses to attract and retain employees,” she said. “Right now, it’s an employees’ marketplace.”
Rosenleaf said that a lack of options for child care disproportionately negatively affects working mothers.
“That’s who is going to have to stay home, most likely,” she said.
Brown said he was glad to listen to the concerns of business owners like Rosenleaf during the chamber’s current statewide tour the chamber. He said the organization puts out a pamphlet recording the voting record of all legislators and they also have picked endorsements for statewide office. The main goal, he said, is to ensure Montana has an attractive business climate.
“We have to have people afford to live here and make a decent living,” he said. “Because, as we say, you can’t eat the snowdrifts.”