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Montana Viewpoint
PADDLING UPSTREAM AGAINST THE WIND

March 25, 2001

The perennial issue of using the Coal Tax Trust principle to fund something important is happening again, and surely the public must be getting tired of this game. Democrats on the whole have fiercely rejected “busting the Trust,” and Republicans have, quite bluntly, baited them with proposing the use of Trust principle to fund things that Democrats claim to care deeply about, such as funding schools. Because it takes a three quarter vote of both Houses to get to the money, it’s a foregone conclusion that it won’t pass; but it’s dragged out year after year as a political gimmick. This time around, Republicans are offering up a short–term school funding increase by taking $20 million from the Coal Trust for the next two years.

More to the point of the argument is why we should have to have recourse to the Trust principle in the first place. After all, we don’t dip into our retirement savings to pay for every day expenses, why should government? The premise is that the state has so little money for extras like public education that extraordinary measures must be taken to increase any kind of funding for schools. This argument has been going on for the last ten years, as if it were a great surprise that’s uncovered at the beginning of every Legislature. Well, it’s certainly true this year that the state monies are slim, but behind every crisis there’s a reason. In this case, we gave the money away.

We gave it away in property tax breaks. $423 million bucks of it in the last five years. I’m well aware that some will rise on their hind feet and declaim that, by golly, Montana citizens deserve every penny of that tax break. And, by golly, I agree. The part I have trouble with is the tax breaks that didn’t go to Montanans. Beginning in 1995, the Republican–led government of Montana began to lower the tax rate on business equipment from 9% to 3%. Some of this tax break went to a worthy cause, Montana farms and businesses. Part of it went to the biggest companies in the world, and that’s the philosophy I have a hard time understanding. Last week, I asked the researchers in the Department of Revenue to look at the tax breaks on business equipment that major industries had received over the last 5 years. Curious? Here’s a short list of out–of–state companies, and the tax break they get this year and every year based on the rate in effect in 1995:

............................Conoco............................$ 3,544,775
............................Stillwater Mining
.................$ 4,709,491
............................Decker Coal.......................$ 1,003,104
............................Smurfit-Stone....................$ 7,080,532
............................Plum Creek.......................$ 3,917,997*
............................(* 7 of about 25 tax locations)

It can be argued that these behemoths needed every penny of it just to stay competitive in Montana, or that they plowed it all back into equipment and hired new employees. It can be argued, but it can be refuted, too. What can’t be refuted is that the Montana economy is in the tank, businesses paid 14% less in property tax last year than the year before, and homeowners paid 5.7% more. We could have eliminated business equipment taxes for most small Montana businesses and still had adequate money to fund education this year. Case in point, the $20 million a year the Republicans want to take from the Coal Trust would have been covered by revenue lost in the tax breaks to those five companies alone—$20,255,899, to be exact. The total amount of corporate tax breaks that I had run is $24 million, and that’s only for nine companies; far from a complete list. That’s money that could be used every year to fund our schools and colleges, not just the stopgap $20 million a year for two years that Republicans offer. To put it in perspective, if we were to replace that lost revenue by increasing taxes on homeowners, we would each be faced with a property tax increase of $98 each.

It’s a policy call, of course. Republicans believe deeply that tax cuts, including cuts for major corporations can only help an economy prosper. As a fellow said to me the other day, it’s like religion, you can’t argue it. Well, if it’s going to work, it better work like rapid lightening, because right now the burden of property tax is falling more and more on just plain folks and local businesses. I can’t fault people for having an opinion that hasn’t held water. Heck, I’ve been wrong and never known it myself. Neither can you go back and fix the past, but you have to look at it at least, so you can see what works and what doesn’t. This ain’t workin,’ and robbing the piggy bank won’t make it work any better.

 

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620

jim@jimelliott.org