Local Option Sales Tax

Shoppers walk through downtown Bozeman on Jan. 28.

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A Bozeman state senator is hoping a new local option sales tax bill will find favor in the Montana Legislature this session.

Sen. Chris Pope, D-Bozeman, introduced a Senate Bill 313, that would give local governments the ability to enact a local sales tax with voter approval. Similar bills have failed in the past, including one earlier this session.

Opponents of local option taxes have cited concerns that a sales tax in some Montana cities would be regressive and would unfairly burden rural residents who come to cities and towns to shop. Supporters have stressed that property tax relief is sorely needed, and that a sales tax would allow cities to benefit from tourist dollars.

Pope emphasized during a committee hearing Wednesday that he is bringing a new proposal to the table: His bill would allocate 50% of the funds raised from a local option tax for infrastructure and affordable housing needs, 25% to property tax relief, 5% to administrative costs and the rest to counties to use for a rural revenue fund.

The need for more revenue is urgent, Pope said.

“This is an essential request of local governments to be able to deal with some issues on the ground that are becoming an alarming existential crisis for our cities and towns,” Pope said. “Our cities are breaking. You can hear the creaking of the boat. Something’s going to give here.”

The bill would give cities the option of asking voters to approve a maximum 4% tax on non-essential items like bar and restaurant tabs or outdoor guide services. It proposes to sunset the tax after 10 years if voters don’t approve it again.

Members of the Senate Taxation Committee questioned Pope on what was considered an essential item under the bill and what the revenues could be used for. One member questioned Pope on whether the taxes could apply to clothing.

Admitting it is not a perfect bill, Pope said he would welcome tweaks to the language. The bill faces an uphill battle as local option sales tax bills have historically failed in the Legislature.

Bozeman Mayor Cyndy Andrus and City Manager Jeff Mihelich both testified in support of the bill Tuesday, as did elected officials from Missoula. Some proponents of the bill touched on the issue of local choice.

“This body artificially limits my ability as an elected official to make financial decisions that serve my residents by capping revenues. Fine, I’ve lived with it,” Missoula Mayor John Engen said. “But when there is an opportunity for my community to decide whether non residents ought to pay a fraction of the cost maintaining our city, please get your big government out of the way. Let me put a solution to a goofy tax system to voters.”

Montana Taxpayers Association executive director Bob Story said he is concerned local sales taxes would unfairly burden those who don’t live in cities, without letting them have any of the benefits.

“(A) significant amount of the money will be paid by Montanans who are tourists when they travel within the state,” Story said.

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Nora Shelly can be reached at nshelly@dailychronicle.com or 406-582-2607.

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