Just as there is a divide between big cities and small towns in national politics, so too there is a marked division between urban areas and rural counties in Montana — and never is that division more marked than when the topic is local-option sales taxes.
Every two years, cities from across Montana send representatives to Helena to lobby the Legislature for the ability of city residents to impose a sales tax that would supplement property taxes as a means of paying for infrastructure and other needs.
And every two years, just as predictably, representatives and senators from small towns and sparely populated counties push back against the idea. That’s because rural Montana residents often recreate in those bigger towns and cities, so they would be paying the tax while not getting back any of the revenue.
This week, the debate was renewed. Rep. Dave Fern, D-Whitefish, is the sponsor of House Bill 577, which would allow local governments to impose a sales tax of up to 4 percent on lodging, restaurants, bars and luxury items. Fern’s involvement is welcome. As a resident of Whitefish, he is well aware of the success of the resort tax (a limited form of sales tax) in that community, so he makes a good ambassador for the concept.
Kalispell’s city manager, Doug Russell, testified on Tuesday before the House Taxation Committee that the city could raise an estimated $6.5 million per year from a 2 percent tax. That’s actually more than the city collected in property taxes last year. What a windfall for strapped municipalities.
The goal of sales-tax proponents is to see out-of-state visitors pay for part of the infrastructure they use in cities like Kalispell and Bozeman, and that makes sense. Moreover, local property taxes would be partly rebated back in cities with a local-option tax, so this is a form of tax relief as well.
The best argument against the sales tax is that it won’t apply to online sellers like Amazon, so there is an incentive for local shoppers to take their money elsewhere to avoid the tax. But let’s face it, that only applies to the luxury items — not to hotels, restaurants and bars. People aren’t going to be ordering their meals and drinks online, and the folks who are paying for luxury items probably have enough spare change that they aren’t going to be hindered by a 4 percent surcharge.
It’s a long shot that the Legislature will approve the bill, and even less likely that Gov. Steve Bullock would sign it after he won re-election partly by painting Greg Gianforte falsely as a sales-tax proponent.
Still, it’s a good idea whose time surely must come sooner or later. If it doesn’t work out this session, we’ll be back two years from now making the same arguments.