House Bill 489 Would Allow Local Voters to Approve 4% Tax on Goods Tourists Buy, Distribute Portion of Money to Rural Communities
“We have 13 million tourists that come through Montana each year, and this bill allows voters to decide for themselves to ask those folks to pitch in.”
By Keila Szpaller for the Daily Montanan
“What we (counties) spend on has changed because of federal regulations, and, quite frankly, because of unfunded mandates coming out of the legislative body,” Briggs said. “Every two years, they tell us, ‘You have to do something else, but by the way, you don’t get any money to do it with.’”
Take some of the money tourists bring to Montana and use it to reduce residential property taxes — that’s the idea behind a bipartisan bill to allow voters in a county to take up a local option sales tax.
If approved by voters, the tax of up to 4% on things like restaurant meals and cabin rentals would go to offset property tax bills for primary residents and help renters, as proposed in House Bill 489.
The bill directs 90% of the money to stay in the county or consolidated city-county that approved the tax, and 9.75% to counties or consolidated governments that aren’t levying the tax, such as rural communities. The rest would be used to defray administrative costs.
Representatives Greg Oblander, R-Billings, lead sponsor, and Tom France, D-Missoula, a co-sponsor, outlined the rationale for the bill at a press conference last week and discussed the reasons it makes sense for Montana’s current economy.
Oblander said LOPTRA, or the Local Option Property Tax Relief Act, is the result of two years’ worth of conversations across Montana, and it balances state oversight with local control.
The bill is crafted in light of a shift in the state economy, with some industries in decline but tourism bringing in an estimated, untapped $5 billion a year, Oblander said. He said the bill asks tourists to pay for some of the services they use, and it puts the money toward solving a problem Montanans hear about every day.
“We all know that the problem in Montana is high property taxes,” Oblander said in a statement. “We have 13 million tourists that come through Montana each year, and this bill allows voters to decide for themselves to ask those folks to pitch in.”
Similar bills have been considered in the past, but Jennifer Hensley, a lobbyist with Missoula County, said this legislation was vetted by people who “hated it the most” — and, she said, for “very good” reasons.
The bill is scheduled to be heard Thursday in the House Taxation committee, and France said the proposal this year is bipartisan and has earned wide support. He said it allows local governments to provide services and be fair to local property taxpayers, to “govern effectively and fairly.”
“We have deep blue counties and deep red counties, we have urban counties, and we have rural counties, and they’re all trying to get a handle on this issue,” France said in a statement. “We recognize that they need more tools in the toolbox, and this bill provides that.”
The bill requires 25-75% of the credit to be distributed to renters, as determined by the local government, and a presentation about the bill said local government will determine how to administer that restriction.
County Commissioners from Cascade, Roosevelt and Missoula counties also spoke at the press conference in support of the bill.
Roosevelt County Commissioner Gordon Oelkers said some smaller communities along the Hi-Line see a significant impact from tourism, such as from visitors traveling to and from Glacier National Park, but they have no way to recover funds.
“We have a lot of out of state people coming in, using our infrastructure and using our public safety, (and) this would be a way to capture some of those new dollars,” Oelkers said.
Cascade County Commissioner Joe Briggs said he travels outside Montana a fair amount, and such taxes are expected and would not be a deterrent to tourists.
Briggs, a Republican, also said if Cascade County initiated the local option tax, every residential taxpayer would see a “significant decrease in their property taxes.” However, he said it’s not coming from corporations or other Montana payers, but from outsiders, which is important to him.
The tax is focused on items tourists spend money on, although it would apply to everyone.
Annual visitor spending in Montana includes $1.4 billion on food and beverage, and $1.1 billion on lodging, among other categories, according to data from the Institute for Tourism and Recreation Research at the University of Montana cited by presenters.
If a 4% tax were levied in Cascade County, the property tax reduction on a home worth $500,000 would be 63%, and in Lewis and Clark County, it would be 49% for the same home, according to calculations from the bill presenters.
In Great Falls and Cascade County, that’s about a $500 credit, France said: “In our view, this is real money in Montanans’ pocketbooks.”
The sponsors said the bill comes with some guardrails in the items taxed and in the requirements at the ballot box.
For example, it excludes SNAP grocery items so as not to hit lower income Montanans, and it also requires local proposals to go to voters during a general election in an even numbered year, and at least 40% turnout for approval.
Polling conducted in winter 2022 showed 64% of people initially supported taxing tourists to reduce local property taxes, and after learning more details, the support grew to 70%, Hensley said.
Other proposals to cut property taxes also are moving through the Montana Legislature, but Oblander and France said HB 489 would work hand-in-hand with them including one supported by the Governor’s Office, House Bill 231, and another from Democrats, House Bill 155.
“We see this bill as complementary to the other good bills moving through the process,” Oblander said in a statement.
Representative France added, “This idea would add to the entire scope of relief. HB 155 and HB 231 are both excellent moves in the right direction. This isn’t addressed with one single bill. We have an obligation to consider all options together.”
At the press conference, the presenters also pushed back against a narrative that local government spending is out of control.
Briggs said it’s a narrative more at the legislature than in the public, but local government is limited to raising taxes by half the average rate of inflation and has been for nearly three decades.
“I’m the first one to say that I suspect it has been very effective at squeezing waste out of county government, but you cannot live on a starvation diet forever,” Briggs said.
Ultimately, he said, it means local government can’t keep up with inflation or infrastructure needs. Briggs also said county budgets must accommodate unfunded mandates.
“What we spend on has changed because of federal regulations, and, quite frankly, because of unfunded mandates coming out of the legislative body,” Briggs said. “Every two years, they tell us, ‘You have to do something else, but by the way, you don’t get any money to do it with.’”