The Local Government Committee voted 7-4 in favor of Senate Bill 320, which would extend to all cities the local sales tax option available now to “resort” communities in Montana.
That option allows voters in cities to approve up to a 3 percent sales tax on “luxury” items, such as restaurant meals and alcoholic drinks.
City officials from around Montana are lobbying the Legislature for the authority to ask local voters whether they want a sales tax on luxury items to provide another revenue stream that could fund local services and provide some property tax relief.
Currently, property taxes are the primary source of revenue for cities and counties.
The vote for SB320 means two local-option bills are headed for the Senate floor, possibly by next week. On Tuesday, the Senate Taxation Committee endorsed a similar measure, Senate Bill 275.
But even the sponsor of SB320 seemed to acknowledge Thursday that getting the idea through the Legislature is a long shot.
“I would encourage my colleagues to support this bill to at least get it out on the floor for a full discussion,” said Sen. Kim Gillan, D-Billings, before the committee vote.
Five Democrats and two Republicans on the Local Government Committee voted for SB320 on Thursday.
Three Republicans and one Democrat voted against it.
Sen. Mitch Tropila, D-Great Falls, said he couldn’t vote for any type of sales tax because it is harder on low- and moderate-income people.
“By whatever name you call it, it is the most regressive tax,” he said.
Sen. Bob Hawks, D-Bozeman, who favored the bill, said “cities are sinking because of the limitations that we’ve placed on them.”
A local-option tax could provide some property tax relief and give cities money to build infrastructure and continue to be centers of economic growth, he said.
“Cities are the center of commerce and the center of economic action for a lot of areas around our state,” he said. “They keep rural communities healthy as well. I think we’re all in this together.”
SB275, sponsored by Sen. Sam Kitzenberg, D-Glasgow, would allow local governments to ask voters to impose a sales tax of up to 4 percent - but only on lodging, restaurant meals or alcoholic beverages “sold by the drink.”
It passed out of the Senate Taxation Committee on a 6-5 vote Tuesday. Gov. Brian Schweitzer has said he supports a local-option tax, but most political observers expect it will have a difficult time getting through the Legislature.
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