Montana Viewpoint


Is current tax policy designed to make us converts to the sales tax?

May 19, 2003

I hear a lot of folks saying that a sales tax is looking better all the time, and mostly they’re reacting to recent increases in the property taxes they pay on their homes. It’s obvious that homeowners’ taxes need to be lowered, but it’s important to ask why they went up in the first place. Want my opinion? Why, it’s to make a sales tax look good!

Now, I know that the cynical political philosopher of the 15th century, Nicolo Machiavelli, said something like “never attribute to cunning what can be caused by stupidity,” but I’ve heard some well respected people say that Republican tax policy has been purposely designed to get us to accept the sales tax as our only hope. Because of what Machiavelli said, I’m not sure that I buy into this theory entirely, but it has some merit, and I’ll tell you why.

A couple or three years ago I was at a Montana economic development conference where the Chief Financial Officer of Microsoft said to 600 people, “taxes on business are too high, and Montana needs a sales tax.” (He also said we ought to put up a statue to Bob Gannon, who was then the head of the Montana Power Company.) What I took that to mean is big business is tired of paying taxes, so the common person should get ready to pony up.

That remark, the opinions of those well respected Helena “insiders,” and a look at tax policy over the last 10 years of Republican control, it just may not be happenstance that homeowners’ taxes are going up. A large part of that property tax increase is because of property tax cuts. Huh?

That’s right, property taxes have been cut 66% percent for some folks, just not homeowners. Montana has different “classes” of property tax, and when you lower taxes in one class the other classes have to make up the difference. The tax that has been lowered is the Business Equipment Tax. While some of that tax relief has gone to small to medium sized Montana businesses, which is good, the lion’s share has gone to huge business conglomerates, which is not so good.

Property taxes go to schools, counties, towns, fire districts and the like, so when the Legislature cuts property taxes, it doesn’t hurt the state’s bottom line, it hurts local governments. Not being totally irresponsible, the Legislature promises to make up for the cuts to local government revenues by reimbursing them from the state treasury.

Well, a promise is only as good as the guy who makes it, and when times get tough the Legislature starts to cut back on the reimbursement. However they’re not totally irresponsible, so they give local governments the authority to raise our property taxes to make up the difference. Thanks a bunch.

So when we see taxes on our homes and small businesses go up, it doesn’t have a lot to so with happenstance or reappraisal. It’s the result of political policy. Is it done to squeeze folks into supporting a sales tax? I can’t say, but if it is, it’s sure working. It’ll work some more pretty soon, because next year property taxes are going to go up $8.9 million as a result of the way the Legislature is “funding” schools.

When I first ran for the Legislature in 1988, I visited nearly every home and business in my district. One person complained to me about their homeowner’s tax, and two about the tax on business equipment. No one has ever volunteered a complaint to me about the income tax. Yet taxes on multinational corporations have been lowered by $82 million a year, and next year an income tax cut goes into effect that will wind up costing another $50 million a year (which will benefit only one third of Montana income tax payers). This is big money. WhoÕs going to make up the difference? A look in the mirror will reveal the answer.

Sure a sales tax is starting to look good. It looks even better to big businesses, because it will cost them less and us more. Folks, I’m sorry. I am not willing to subsidize the Walmarts and Exxons of this world by paying taxes they should be paying. This may not be a plot, but it couldn’t work any better if it was.

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