House, Senate sales tax proposals take shape
HELENA - Two sales tax proposals were fine-tuned Monday as attention turned toward an extensive overhaul of Montana's tax system with a month left in the legislative session.
Both measures would provide more than $400 million a year in income and property tax relief, and each contains provisions to soften the effect of the new tax on lower-income Montanans.
One was pieced together by several members of the Senate Taxation Committee and could reach the Senate floor for debate Thursday. The other bill was approved 10-8 by the House Taxation Committee and may be on the House floor for debate the same day.
''This is an innovative sales tax proposal that all states wish they had,'' said Sen. Mike Taylor, a Proctor Republican and one of those revising Senate Bill 470.
He agreed to a Democratic request to adjust the bill so that it provides more money to help balance the budget being prepared by this Legislature.
Rep. Jim Peterson, R-Buffalo, said his House Bill 749 is attractive because it is ''simple and easy to administer.''
Neither measure puts the sales tax on the ballot in 2004. But both allow the tax to be in effect for a time before a vote is required.
Peterson said he hopes Montanans will test drive a sales tax and the related cuts in other taxes before passing judgment. But he's not worried about a citizen referendum on his proposal.
''The risk is there,'' he said. ''If the people demand a vote, so be it.''
Rep. Kim Gillan of Billings said she and other Democrats on the House Taxation Committee are skeptical of the bill until they learn more about who benefits most.
Depending on the answers, the measure could get some minority support, she said. ''Democrats are more open to tax reform than ever before.''
Senate Minority Leader Jon Tester, D-Big Sandy, had mixed feelings about the Senate plan and doesn't like that Montanans would not vote before the tax takes affect.
On the other hand, he said, ''It appears to be a pretty progressive sales tax as sales taxes go. It has some merit for raising revenue and distributing the tax burden.''
The Senate bill would raise $464 million its second year and provide $407 million in income and property tax relief.
Peterson's bill would raise $459 million its first year and provide $412 million in tax relief.
When an additional $4.3 million is removed for state costs of administering the tax, $53 million is left for deposit in the state treasury. Peterson said that extra money represents the estimated 12 percent of the sales tax that would be paid by out-of-state visitors.
The Senate measure in the first year puts $77 million into the state general fund, the government's checking account. After that, $21 million to $25 million a year would go into the general fund.
The Senate bill gives Montanans an income tax credit for some or all of the estimated sales tax they paid, with the amount higher for those with lower incomes.
Peterson's bill doesn't provide such a credit. Instead, it changes the personal income tax exemption to increase the level of income exempt from taxation.
Peterson said his option is better because it leaves money with taxpayers rather than having government keep it for a year before returning it to Montanans through a tax rebate or credit.
The Senate bill would put the fate of the sales tax before voters in 2006, after they have seen it work for a year.
Peterson's bill would require a public vote in 2008, after four years.
The biggest difference between the two measures is that the Senate proposal creates a ''rainy day fund'' in the first year. The fund would be for emergencies and could be spent only with a two-third's vote of the Legislature and approval of the governor.
In the first year, about $109 million would be put into the fund, and $77 million would be deposited in the general fund. Deposits would continue into the rainy day fund until the account exceeds a $156 million cap and the excess would be rebated to income tax payers.