No new taxes come out of recent Legislature

By WALT WILLIAMS Chronicle Staff Writer

When the Montana Legislature adjourned Thursday, lawmakers wrapped up four months of business without raising taxes, depending, of course, on how you define a tax.

Nearly all new tax proposals died quick deaths during the legislative session, thanks in part to a promise by Gov. Brian Schweitzer to veto most new taxes and a nearly $300 million state budget surplus that satisfied the need for new revenue.

Lawmakers were equally hesitant to pass any tax structure overhauls. As usual, a number of statewide sales tax bills were floated before legislators and, as usual, they went nowhere.

"The session has been marked by the absence of major changes in tax structure," said Doug Young, a professor of economics at Montana State University.

Among the causalities was a reform package co-sponsored by Rep. Bill Warden, R-Bozeman, to replace the state's income tax with a sales tax. Other proposals would have replaced the statewide property tax that funds public education.

Cities and counties didn't get the power to enact their own local-option sales taxes, and House lawmakers denied small cities such as Livingston the taxing authority enjoyed by tourists towns like West Yellowstone by refusing to raise the population cap on resort communities.

"We need to look for a statewide solution," said Mary Whittinghill of the Montana Taxpayers Association, which opposes local-option sales taxes.

Also dying were a number of targeted taxes meant to address perceived social ills. They included:

€ A bill raising the tax on beer by a nickel per can to pay for drug treatment and prevention programs, which supporters claimed are woefully underfunded by the state.

€ A new tax going after big-box stores like Wal-Mart by targeting gross receipts.

€ Bills taxing soda pop, video gaming machines and video rentals.

Lawmakers would have raised taxes by $100 million had all the selective taxes become law, Whittinghill said.

"We had a huge surplus, so the additional selective taxes were not necessary," she said.

The Legislature did approve a $5 fee hike on vehicle registrations to fund pay raises for the Montana Highway Patrol. Some Republicans claimed it was really a new tax because motorists were forced to pay it.

Base pay for highway patrol officers is now $12.80 an hour, much lower than what the state's largest counties pay their deputies, Lt. Col. Mike Tooley of MHP said.

The highway patrol has a hard time retaining officers as a result. The fee will allow it to raise base pay by $4.50 an hour in 2006.

House Republicans argued the money should have instead came from the general fund, the state's main source of revenue. But Tooley said the same thing happened to the Oregon State Police, and as a result, when times were lean, Oregon lost half its police force.

"That is totally opposite of what we want," he said.

Lawmakers were more generous with small, targeted tax breaks. Filmmakers who film in Montana and hire locals will earn tax credits for their projects, although the credits aren't as high as supporters had hoped. Small distilleries will get tax breaks to produce whiskey, vodka and other spirits.

Democrats also successfully froze a declining business equipment tax at 3 percent, sparing homeowners what the party said was a future tax shift as money from the tax used for schools and other services dried up.

Walt Williams is at wwilliams@dailychronicle.com

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