Lawmakers are considering whether to give local governments the authority to ask their voters to approve a local option sales tax. The money raised would be used to provide property tax relief and pay for public works projects.
Senate Bill 331 is based on the existing resort tax model that’s assessed on goods and services purchased by tourists. Current state law restricts the resort tax only for communities with a population under 5,500 and draw a high number of tourists. Local residents vote to impose this tax. The money collected pays for public works projects and property tax relief.
Former Whitefish Mayor Chuck Stearns said last year there was a 53 mill reduction in property taxes for residents in this northwestern Montana community near Glacier National Park because of the resort tax.
He said West Yellowstone, Whitefish and Red Lodge all have the lowest property tax levies when compared to the state’s larger cities.
“They all have the resort tax,” Stearns said. “So I think there’s a clear connection and nexus between property tax relief and a resort tax or a luxury tax.”
What Senate Bill 331 would do is give the state’s larger communities - Billings, Bozeman, and Missoula, for example - the ability to put such a tax before its voters.
How Montana funds public works projects has become a political football during recent legislative sessions and lawmakers have struggled to find the money to provide the property tax relief voters are demanding.
Senator Mike Phillips, D-Bozeman, said his bill addresses both issues in the current political and fiscal climate where lawmakers are struggling to find any money for government services.
Phillips says Senate Bill 331 is one way to lower taxes and pay for public works projects.
“I find that seductive,” he said. “Does anybody realistically expect that Helena can remain the primary cash cow for all of Montana’s communities going forward? Ask yourself, ‘How well has that served us to date?’”
During the 2015 Legislature, a $150 million infrastructure bill that included bonding for projects failed by one vote on the final day of the session. In 2013, Governor Steve Bullock vetoed a $55 million infrastructure bill citing budget reasons.
“Does anyone really continue to think that we can continue to rely on Herculean lobbying efforts from all of the communities around Montana to secure their needs?” said Phillips. “Ask them, ‘How well is that working for us and them?’ It’s not working. We’re pitting communities against one another.”
Opponents commended Phillips’ bill, but they argued this tax unfairly targets restaurants, bars, rental cars, and convenience stores.
Brad Longcake spoke on behalf of convenient stores. He worried the tax will drive away customers.
“Our business is a penny business,” Longcake said. “We’re always looking for that competitive edge. And little adjustments make a huge difference on purchasing power of individuals who frequent the stores. The burden of this tax would not be evenly distributed over the entire community.”
The Senate Taxation Committee did not immediately vote on Senate Bill 331.