Why is there no sales tax in Montana?
Austin Amestoy: Welcome to the Big Why, a series from Montana Public Radio where we find out what we can discover together. I'm your host, Austin Amestoy. This is a show about listener-powered reporting. We'll answer questions, big or small, about anything under the Big Sky. By Montanans for Montana, this is the Big Why.
Austin: Today, we’re talking taxes with reporter Shaylee Ragar.
Shaylee: Hi, Austin!
Austin: This is a topic that may be top of mind for some Montanans right now.
Shaylee: Yeah, I’d say so. Before listeners let their eyes glaze over — the tax debate is actually pretty hot right now.
[Rally chanting: What do we want? Fair taxes now …]
Shaylee: You may think that was a reenactment of the Boston Tea Party, Austin, but that chant actually happened at a rally at the State Capitol last week. About 200 people gathered there, organized by Big Sky 55+, a group that advocates for older Montanans.
Austin: Wow, what prompted the rally?
Shaylee: Broadly speaking — people are upset about the hike in property taxes this year. And former Gov. Brian Schweitzer really got the crowd going.
Schweitzer: Why did they raise your taxes and now they're saying, 'but we're going to give it back'? It kind of sounds like they're trying to bribe you with your own money.
Shaylee: Property taxes are top of mind for homeowners and renters across the state who are just now getting their tax bills. One of those concerned taxpayers includes a listener who submitted a question wondering if other forms of tax could offset those rising property taxes. Specifically, they were curious why doesn’t Montana have a sales tax?
Austin: Ah yes, one of Montana’s claims to fame — no sales tax. A state where stuff at the dollar store actually costs one dollar. How does that come into play with property taxes?
Shaylee: So, Montana is one of five states that doesn’t have a statewide sales tax, meaning the state and most local governments collect most of their revenue through income and property taxes.
Some argue that taxing sales spreads the tax burden around and alleviates putting too much pressure on one revenue source. And in Montana, sales tax has been a hot political topic since the '70s.
Austin: What do you mean? Have people tried to get a sales tax going in Montana?
Shaylee: They have. Back in 1971, for example, in the midst of some financial woes the state Legislature put a proposal on the ballot that would have created a 2% sales tax while simultaneously reducing income taxes.
Evan Barrett was executive director of the Montana Democratic Party then, and the party teamed up with labor unions to campaign against the sales tax proposal, arguing it would disproportionately burden low-income residents. He says their message centered around,
Barrett: Who wants to have this sales tax? Because regular people don't want it. Who would want it? And we thought, well, all the big corporations in Montana wanted it. And that was the battlefield upon which the sales tax was fought out on in 1971.
Shaylee: Official records obtained through a lawsuit at the time showed that the biggest financial backers of the pro-sales tax campaign were large companies. It would have likely alleviated some of their tax burden.
In the end, 70% of Montanans rejected that proposal in 1971.
Austin: But that’s not the end of the story?
Shaylee: Right, sales tax proposals showed up on the ballot a couple more times. In 1992, Republican Marc Racicot and Democrat Dorothy Bradley were competing to be Montana’s next governor. Both supported adopting a 4% statewide sales tax, saying the state needed more revenue.
When Racicot won, he made good on that promise. He pushed hard for that proposal and it went before voters again in 1993.
This time, Democrats and labor unions teamed up with far-right conservatives to campaign against the measure.
Austin: That's definitely an uncommon alliance. What was the outcome of that election?
Shaylee: The statewide sales tax went down even harder. 74% of Montanans voted against it.
Even so, Gov. Racicot continued to advocate for that additional source of revenue. When he ran for reelection in 1996, he reflected on that failed ballot initiative during a debate, which was archived by C-SPAN.
Racicot: I do believe that by the time it worked its way through the Legislature, it was not easily understood. I think if there is a simpler presentation made to the people of Montana, now with the constitutional limitation in place, that we ought to make certain that we try every avenue we can to bring balance to Montana’s taxpayers.
Austin: Wait, did I hear him mention a constitutional limit?
Shaylee: Yes. So, there was one sales-tax-adjacent proposal that did succeed. That group of conservatives I talked about previously who were concerned about a sales tax went a step further. They pushed for a pre-emptive constitutional amendment to limit a sales tax to 4% if, god forbid, in their eyes, one ever passed. Montana voters approved that amendment in 1994. And it’s still on the books. That really set the stage for future debates over a statewide sales tax.
Austin: OK, so bring us up to speed today. Where does the debate stand?
Shaylee: Proposals to adopt a statewide sales tax have continually cropped up over the past two decades at the state Legislature, and have continued to fail.
Bob Story, executive director of the Montana Taxpayers’ Association, has long stood up as a proponent in those legislative hearings for a sales tax, saying it’s the most fair way to collect taxes.
Story, who was previously a state legislator, says sales tax hearings used to bring out hundreds of people to debate. But as the years went on and the movement lost steam, only a handful of people would show up
Story: The bill would get tabled and that would be the end of it.
A sales tax has become somewhat of a taboo subject in Montana politics. I mean, politicians running for office don’t want to touch a sales tax proposal with a 10 foot pole. For example: When Gov. Greg Gianforte was running for office in 2020, his opponent, Democrat Mike Cooney, hammered Gianforte constantly on his previous support for a statewide sales tax. It was a key strategy of Cooney’s campaign. Gianforte went on to adamantly oppose a sales tax, saying Montanans have made their thoughts clear.
Austin: Do you think that means a sales tax is just dead in the water here?
Shaylee: You know, it’s hard to say for sure, but I don’t think it quite is. It’s been some time since voters took a look at a statewide sales tax on the ballot, and there certainly are Republican lawmakers who are interested in pursuing a sales tax.
Story says we’re missing out on catching new revenue, like from tourists who don’t pay any other kind of tax here. And the state is losing other revenue as natural resource industries, like coal mining, shrink.
Story: We’re pretty much a service economy and a lot of service industries don’t have property.
Shaylee: And while the Democrats who rallied at the Capitol over high property taxes don’t necessarily disagree, they’re adamant that a sales tax is the wrong way to alleviate Montana taxpayers’ burden.
I caught up with former Gov. Schweitzer after the rally and here’s what he had to say.
Schweitzer: We don’t have a sales tax in Montana and we damn sure don’t want a sales tax in Montana.
Susie Holt, a retired librarian also in attendance, told me she saw a more than a $700 increase on her property tax bill this year.
Holt: Unconscionable. That is not OK.
Shaylee: But does she want to shift some of that onto consumers? No, she says it’s too regressive. .
Austin: Thanks for taking the time to break down such a complicated topic with us.
Shaylee: No problem, Austin.
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