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On Special Assignment: A history of failure for the sales tax in Montana

Posted at 7:52 AM, Mar 06, 2019
and last updated 2019-03-06 09:55:49-05

HELENA- Montana is one of only five states in the country that doesn’t have a general sales tax, but it’s not for the lack of trying.

The colorful history of the sales tax battles over the years started when pro-sales tax Republican Gov. Tim Babcock was defeated in the 1968 election.

Three years later, Montana voters were asked to choose between a sales tax or an income tax surcharge to balance the state budget.

The pro-sales tax forces were well-organized.

“We were up to our eyeballs with the sales tax every minute of every day for five months,” said Evan Barrett, who in 1971 was executive secretary of the Montana Democratic Party. “While it ended up being defeated overwhelmingly, that wasn’t a given at the beginning of that debate.”

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Jim Murry, former Montana AFL-CIO head. (MTN News photo)

Along with union boss Jim Murry of the Montana AFL-CIO and the Montana Farmers Union, Barrett was helping rally voters to defeat the proposed sales tax.

“We didn’t want our workers to have to pay this unfair tax,” said Murry. “They were shifting the tax load from corporate interests and business interests to low-income people.”

Promoting the sales tax was the group S.O.S., Save Our State, headed by Speaker of the House Jim Lucas of Miles City.

“The SOS people were making the argument the money to support the sales tax was coming from little old ladies and people on retirement,” Murry said.

It turned out the pro-sales tax group wasn’t funded by little old ladies, but rather by nearly every large corporation and company doing business in the state.

Using an obscure provision from Montana’s 1912 Corrupt Practices Act, the groups opposing the sales tax won a court ruling forcing SOS to open its books to the public. The information came to light on the eve of the big vote.

“All the essence of dark money was in that battle in ’71,” said Barrett. “That battle is still in the forefront today and Montana, by the way, nationally, is at the forefront of that whole debate,” said Barrett.

“When it was disclosed that the whole thing was being paid for by the major corporations, that just changed the dynamics of the whole debate,” said Murry.

Montana voters promptly buried the sales tax referendum, voting against it by a whopping three-to-one margin. The victory was so lopsided, it silenced the issue for the next two decades.

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Former Montana Governor Stan Stephens (MTN News photo)

Fast forward to 1989. When faced with a pending budget shortfall, Republican Gov. Stan Stephens proposed a 4% sales tax. He even got the state’s largest teachers’ union to support it.

Eric Feaver, head of the Montana Education Association, told lawmakers the bill provided the necessary funds for quality public schools.

“House Bill 747 provides the necessary property tax relief this state has long demanded and provides the necessary revenue we need to fund our public schools,” said Feaver.

Even though that sales tax effort failed in 1989, the issue was back before voters just four years later.

Stephens’ successor, Republican Gov. Marc Racicot, barnstormed the state to drum up support for his 4% general sales tax, that offered both property and income tax relief.

Once again, Feaver discovered how lonely it could feel to support a sales tax in Montana.

“I walked into the room, and within 15 minutes I could tell I was the only one there who really wanted this thing to pass,” recalled Feaver.

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Former Montana Governor Marc Racicot (MTN News photo)

Racicot’s sales tax went down even bigger than its predecessor in 1971, with 74.9 percent voting no.

“That sales tax would have helped enormously fund public education in Montana,” said Feaver. “But we just gave away that moment, and I don’t see that moment coming back.”

So in 2019, the question is will a general sales tax ever become a part of the Montana tax landscape?

In the world of politics, we learn never to say never, but believe it or not, there is a sales tax bill up for debate at this year’s legislative session. We’ll keep you posted.

-Jay Kohn reporting for MTN News