Five years ago, then-Gov. Judy Martz proposed a pared-down sales tax, calling it a “tourist tax.” Nobody - well, almost nobody besides the Republican governor - thought it was a good idea, and they were right. Although her sales tax supposedly aimed at tourists because it would apply to restaurant meals, alcoholic beverages, rental cars, motel rooms, recreational equipment rentals, bakery treats and similar purchases, the reality is that some 70 percent of those expenditures in Montana are made by Montanans, not tourists. The proposal flopped, big-time.
Her idea is back, repackaged as the “local option tax.” The Montana League of Cities and Towns wants the Legislature to give cities the ability to institute a sales tax on the sorts of things tourists buy, contingent on approval by local voters. Leading the charge to tax “tourists” is Missoula Mayor John Engen. Joining in support is Gov. Brian Schweitzer.
Back in 2002, Schweitzer penned a guest column in the Missoulian talking about Martz's proposal. In it, he pointed to its central deception. “This so-called tourist tax wouldn't be resident-selective,” he wrote. “Rather, it's a tax selective to the items purchased. We Montana ‘tourists' will be taxed in our own towns doing business on Main Street Š.”
Bingo!
We asked Schweitzer about his apparent change of heart. He says there's a big difference in the current incarnation of the tourist tax - the part about local option. If voters in a community want to tax themselves, he says they should have that ability. He says he's not urging cities to create a new tax, but he thinks it's a choice a community should be able to make. “I'm not going to tell the people of Missoula what to do,” he said, if at the level of government closest to them they want to enact a tax.
He makes a valid point. But closer examination reveals some holes in that argument.
In approving a local option sales tax, people in, say, Missoula, wouldn't be voting to tax just themselves. They'd be voting to tax selective purchases - purchases made by anyone, including Montanans from cities that didn't have local sales taxes, as well as visitors from elsewhere. Indeed, even though locals might pay the lion's share, the sales pitch would be that modest pain would bring greater gain, because we'd also be taxing people from outside the community - people who wouldn't have the opportunity to vote about it. Before long, however, other communities would follow suit, taxing Missoulians as they traveled in the state. The notion of “extra” money coming into the community from a “tourist” tax glosses over the likelihood that we'd all be paying “extra” money in our visits elsewhere. Eventually, we'd see a crazy quilt of selective sales taxes from one community to the next, creating sufficient inequity and confusion that the Legislature ultimately would step in to fix the problem. Voila! Montana would finally have a statewide sales tax.
Just what you always never wanted. This sales tax would perhaps be limited to pseudo-tourist items at first, but of course would be expanded over time until the only logical thing would be to make it just like every other state's sales tax.
A general sales tax is something we once advocated. But after two statewide elections in which Montanans resoundingly rejected a sales tax, we decided the voice of the people was something we ought to respect. Montanans don't want a sales tax rammed down their throats, and we're pretty sure they'd just as soon not have one by deception, either. With Montana currently sitting atop a $1 billion projected tax surplus, it's pretty hard to argue that we don't have enough taxes. True, the state's windfall isn't equitably shared by cities and counties, but that calls for some form of revenue sharing, not a new, particularly objectionable tax.
As an aside, we might also talk a bit about equity. Just as a local-option sales tax on “tourist” purchases wouldn't be limited to tourists, neither would it be limited to people who can afford higher taxes. If you think it's only the well-to-do staying in motels, staying in campgrounds and eating restaurant food, think again. Pay closer attention the next time you stop in for a Big Mac or taco. Notice that campgrounds and motels, albeit the cheaper ones, often are the housing of last resort for people who can't afford high rent. Many of the “tourists” the cities yearn to tax are working-class folks who already sacrifice too much of their paychecks to attend their kids' ball games or take in the county fair. Democrats traditionally have objected to sales taxes because they're regressive - poor people pay proportionately more of their income than do the wealthy. That's a problem that doesn't change by editing “sales tax” to “tourist tax” or “local option tax.”
Of course, what our mayor, the governor, the League of Cities and Towns and others who advocate this new tax really ought to call it is the “Martz tax.” It's only fair, since she thought of it first.
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