At issue in the House Taxation Committee was Senate Bill 220, by Sen. Jim Elliott, D-Trout Creek. It is the Schweitzer administration’s signature bill to empower the Revenue Department to pursue out-of-state individuals and businesses that Revenue Director Dan Bucks doesn’t believe are paying their fair share of taxes to Montana.
Elliott, who sponsored a similar bill defeated in 2005, said this version would raise $30 million over the next two years. The same business groups attacked his 2005 bill on similar grounds, he said, but none have brought forth their own solutions.
The estimated $30 million SB220 would raise over the next two years would be used to permanently exempt from property taxes the first $80,000 of market value of equipment owned by a business, farm or ranch. Under current law, there is a $20,000 threshold, which means those companies whose business equipment is worth $20,000 or less pay no taxes, while those with $21,000 worth of equipment pay on the full $21,000.
The bill would take 6,500 more businesses off the business equipment property tax rolls on top of the 17,000 that dropped off after 2005, said Evan Barrett, the state’s chief business development officer.
A key provision would require out-of-staters selling land in Montana to set aside a share of the price for capital gains taxes so that the state collects the revenue owed.
The committee took no immediate action on the measure.
Although the bill appeared doomed in the Republican-controlled House, House Majority Leader Michael Lange, R-Billings, disagreed. He said later Friday he believes SB220 in some form will be part of the final school funding, property tax and budget deal that the House, Senate and Gov. Brian Schweitzer will work out to end the session.
As they did in the Senate hearing, business representatives took turns attacking the bill, section by section. Elliott referred to the tactic as “death by a thousand cuts.”
The business lobbyists’ theme was the department is seeking complex, untested and unbridled power it doesn’t need because it already can go after tax cheats, a claim disputed by Bucks.
“We support the intent of this bill,” said Dan Vukovich, of Great Falls, president of the Montana Society of Certified Public Accountants. “Tax cheats have to be stopped, but at what cost? It’s anti-taxpayer. Proposals aimed at out-of-state taxpayers will also hurt hard-working, honest Montana taxpayers.”
The bill will make taxes even more complex for Montana taxpayers, he said.
“The law sounds great,” he added, “but when you dig down it, line by line, we believe the Department of Revenue already has the tools it needs to collect taxes.”
Robert Sewell, representing the Montana Land and Title Association, disagreed with Revenue Department estimates of out-of-state owners of Montana property who owe taxes. He compared the bill to “swatting a gnat with a 2-by-4.”
“The bill is designed to grant the department unfettered and unprecedented power,” said Bruce Spencer, of the Montana Automobile Dealers Association. It would make Montana “an experimental tax state” engaging in “test-tube tax policy,” he said.
Bucks disagreed, saying, “There’s nothing here that hasn’t been done somewhere else.” He listed some of the states.
Other SB220 backers said it gives needed tools to the department to go after suspected tax scofflaws.
“That money belongs to Montana, just like the dollars that come out of our members’ paychecks,” said Don Judge, representing Teamsters Local 1190. “What they’re doing is stealing from Montanans. Our members end up having to pay more.”
Kelly Flaherty-Settle, a Canyon Creek rancher, said the $20,000 business equipment tax threshold was “like a spit in the bucket for us. Eighty thousand dollars is not a pot of gold, but it’s better than $20,000.”
Former Rep. Jane DeBruycker, D-Dutton and a farmer, said: “This bill brings fairness to Montana’s tax policy and closes loopholes. Let’s go after the people who don’t pay our taxes.”
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