The ugly, horned specter of a general sales tax for Montana recently haunted a meeting of the Havre Area Chamber of Commerce. According to a Havre Daily News report ("Tourism raises voice for support at Chamber," April 25, page 1), one of our Republican legislators from a Havre House of Representatives district made an impassioned plea for such a regressive tax. No one is documented as speaking up against it, although — if recognized and given a chance to speak — Sen. Greg Jergeson, who was present at the meeting, has stated forcefully that he is opposed to such a tax.
Sales taxes are regressive taxes because adding several percentage points to the cost of all items sold in a sales tax obviously and automatically reduces the total number of actual individual sales of all items made in that state, especially large items like refrigerators and cars, where a sales tax can amount to hundreds of dollars per sale. This reduction in total sales of items across a state is never taken into account by those in the state who celebrate the amount of income for the state resulting from a sales tax. Thus, sales tax income is always less than the advocates celebrate up front that it will be.
As a result, the initial percentage collected on each sale by the tax — as calculated and advertised by its advocates — can only be reached by regular increases in the percentage of tax collected on each and every sale made in the state. This has been the pattern across every state where sales tax has spread its morally objectionable stain.
For the effect of sales tax already in Montana, look at the impact of the so-called tourist sales tax that Montana already extracts from motel rooms rented in the state. In Butte, where the recent recession has struck hard, nearly every locally owned, privately operated motel is boarded up. Only chain motels remain in business with their often very over-priced rooms.
Then, there is the additional cost to every business in the sate of collecting the tax itself from every customer and keeping a complete and detailed record of every cent collected so the state tax-collectors can be sure to get their hidden cut of the profits of the sale. The cost of collecting sales tax across a state exceeds that of every other kind of taxes a state may collect.
Finally, there is always the claim when right wing collectivists are arguing for sales tax and other taxes, such as income taxes and property taxes which may be present in such states, will be reduced by the income from sales tax collections. However, in the six states I've lived where sales tax is a fact, these reductions in other taxes seldom actually occur. And even when they do, the reduction disappears almost immediately afterward. Somehow, state governments always find additional ways to eat up the supposedly increased tax income from a sales tax; and other taxes — along with the sales tax itself, of course — in general go up... not down.