Bozeman lawmaker’s bill eliminates some property taxes in favor of sales tax

Rep. Kerry White, R-Bozeman, is carrying House Bill 300, which would eliminate some property taxes completely and establish a statewide sales tax. (Tim Pierce/UM Legislative News Service)

(UM Legislative News Service) A massive, 426-page bill introduced to the Montana Legislature Wednesday would create a 2.5 percent statewide sales tax and eliminate three types of property taxes.

House Bill 300, sponsored by Rep. Kerry White, R-Bozeman, would tax most transactions, including internet sales, with some exceptions, like SNAP-eligible food and medicine.

White said the revenue collected from the tax would go to local governments to fund K-12 schools and infrastructure projects. White also said no money collected from the tax would go to the state general fund.

“I want this money to be focused on infrastructure, health, safety and welfare,” he said.

The bill also sets a “tax holiday” between October 20 and November 20. During that period, the tax would be lifted. White said the tax is targeting tourists, who he said will take 33 percent of tax responsibility with his new bill.  The “holiday” is set in between the summer and winter tourism seasons.

Rep. Mark Nolund, R-Bigfork, was the only supporter of the bill during the House Taxation Committee’s public hearing Wednesday. He said Montanans are burdened by high property taxes and the state tax system is in need of restructuring.

“You will see this is a relief. At first glance, you might say ‘no, who wants a sales tax?’ And I’m a Republican, why in the world would I support a sales tax?” he said. “However, with the revenue we’re going to be bringing in by reducing our property tax, I’m going, ‘this is a win.’”

Revenue director Gene Walborn opposed how the bill completely cuts agricultural, residential, commercial and timberland property taxes. He says relying on income and sales tax would be unstable.

“So, we take away one of our most stable tax revenue sources, move to a sales tax, and also rely on an income tax,” Walborn said. “Those states that have that type of model, during the great recession, really had fiscal problems”

The bill also completely eliminates the property tax office, which collects the kinds of property taxes that would be cut. White said removing the office would save the state $26 million. Walborn said this would also remove around 200 employees from the Montana Department of Revenue.

Heather O’Loughlin is co-director of research and development at the Montana Budget and Policy Center, a non-partisan, nonprofit group that researches Montana budget, tax and policy issues. She was one of nine opponents to the bill at the hearing, and said a sales tax harms low-income people who spend most of their income on goods and services.

“Montana is still asking those at the bottom to pay a greater share of their income in taxes than those at the top,” she said.

The House Taxation Committee did not immediately vote on the bill.

Tim Pierce is a reporter with the UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Broadcasters Association, the Greater Montana Foundation and the Montana Newspaper Association.