You’re standing in the “9 items or less” aisle with a loaf of Wonder Bread ($.99), a king-sized Kit Kat ($.99) and jug of 2 percent ($2.99). After a little simple addition, you reach into your wallet and pull out a five to cover the $4.97 total. With no sales tax the calculation is easy, and it’s what Montanans are used to, what they like. But like it or not, the Legislature is looking with determination at changing the state’s cash register math, hoping that the budget crisis will make Montanans forget their deep-rooted aversion to sales taxes.
It’s hard to map the roots of Montanans’ animosity toward sales taxes, but it is clearly there. The public has twice had opportunities to vote on the taxes—in 1971 and 1993—and rejected the measures both times. Sen. John Bohlinger (R-Billings) has a theory why the past efforts have failed.
“We have the wingnuts and the lugnuts,” he says. “The wingnuts are the very fiscally conservative Republicans and they don’t like it because it takes too much money [from the citizens]. And the lugnuts are those entrenched Democrats who are opposed to it because they oppose any sales taxes because they say they’re regressive. I get very frustrated by these people who are extreme in their perspective.”
These polar perspectives have made it difficult for the Legislature to find a revenue-raising compromise in a session where not finding additional revenue means cutting about $250 million from the state’s budget. Before the session, Gov. Judy Martz indicated that she wouldn’t support any new taxes and many Democrats committed themselves to stonewalling any regressive sales taxes—sales taxes that disproportionately burden the lower income groups. But after three months of debating and voting, only two revenue-raising bills remain—and both rely on some form of sales tax.
Currently being batted around the House Taxation Committee, SB 470 passed out of the Senate 32-18 last week. The bill would create a 4 percent sales tax in exchange for a reduction in property and individual income taxes. According to the state Revenue Department the bill would raise $471 million and would provide $239 million in property tax relief over the next biennium. It would also provide $62 million in income tax credits to low-income people to offset anticipated sales tax payments.
Originally, the bill would have implemented the tax on July 1, and allowed Montanans to vote on it in November 2006, but Sen. John Cobb (R-Augusta) successfully pushed for an amendment setting a special public vote this October.
“If you’re going to have a vote on the sales tax bill anyway, do it when there’s nothing else on the ballot and it’s just up or down, yes or no,” he says.
Cobb says he believes the voters should have a chance to decide the issue sooner rather than later. But Bohlinger thinks Cobb’s amendment spells the death of the Legislature’s best chance at bringing in more revenue, and thus avoiding cuts to education and human services.
“They’ve made it very, very difficult to pass because too many people will vote on it without even understanding it and they’ll vote it down,” says Bohlinger. “How do you know how it’s going to affect you until you’ve paid the tax and you’ve enjoyed the benefits? After two years, you’ll have a basis for making a decision on whether or not you want to support it.”
Bohlinger and Cobb have been two of the Republican party’s most outspoken advocates for the funding of education and human services. Both have argued to convince Republican peers that Martz’ proposed education and human service cuts are unacceptable, but have disagreed on the specifics of SB 470.
“I know my party doesn’t like it and they think the voters will vote it down,” says Cobb. “I don’t like sales taxes either, but I was trying to help and this is the best chance to do it.”
The other surviving revenue bill is SB 407, which passed 31-18 and is also being debated in the House taxation committee. SB 407 is a substantially amended version of the governor’s budget plan and would raise $85 million over the next two years. The bill increases taxes on tobacco, lodging and rental cars and revises state income taxes beginning in 2005. But many think the amount SB 407 raises is insufficient.
“Senate Bill 407 just gets to the governor’s budget,” says Cobb. “It’s the people [left out of] the governor’s budget we’re trying to save.”
Neither bill is the compromise that Republicans or Democrats wanted, but many members of both parties have gotten on board with one or the other because they’re desperate to save programs or pump more funding into underfunded ones. Some are encouraged by these final options, but many worry about the bills’ chances for survival in the House.
“The House has systematically gotten rid of all new revenue bills—and we had a lot of good revenue bills over here—but every single one of them is dead or tabled,” says Rep. Ron Erickson (D-Missoula). “Given that, we have to hope that we will take a good look at 407 and 470.” Still, Erickson is also skeptical of SB 470 withstanding a public vote.
“Certainly, the data doesn’t look very good from the past,” he says. “Nonetheless, what I’ve seen in three consecutive campaigns going door to door is that more people have become interested in sales taxes as time has gone on.”
Even with a united House and Senate, Martz can still veto either or both bills. As of yet she has made no definitive indication of which direction she’s leaning. Cobb thinks the best bet for a Martz endorsement is 407, but says that 407 alone is a long way from helping the state out of its crisis.
“We have a tax system that can’t bring the money in,” he says. “We’re going to have a wreck next session too. Even with this sales tax we don’t have enough money to fund existing government next session.”
Which means that even a $.04 hike in the cost of your king-sized Kit Kat may not prevent your kid’s UM tuition from going up, or your neighbor from losing her prescription medications.