Despite the resounding defeat of a sales tax initiative and subsequent suspension of a fallback income tax plan last summer, Montana still faces taxpayer challenges.
The sales tax was voted down by a 3 to 1 margin, and its substitute, a restructured income tax, was scuttled by a citizens petition group that forced the Legislature into a special session to cut back the '94-'95 biennium budget by $26 million.
In addition to suspending any new taxes, the petition drive gives voters a chance to permanently bury the fallback income tax plan in the November general election.
But that's not all. Three more citizen groups are currently circulating petitions to put initiatives on the November ballot that would further tie the taxing hands of the Legislature:
- The Tax Equity Action Movement wants property taxes rolled back to 1986 levels and restrictions placed on any increases. With in-migration flourishing, especially in northwestern Montana, home prices and real estate taxes have inflated beyond many homeowners' financial reach.
- The Montana chapter of Ross Perot's organization, United We Stand America, wants a constitutional initiative to require voter approval on any new or increased tax imposed by state or local governments.
- Slightly less restrictive is a plan promoted by Citizens Against Prolific Spending; this group requires a two-thirds vote of the appropriate state or a local government body to increase taxes or spending.
All petitions require 10 percent of qualified voters, or 40,783, to put initiatives on the ballot. And according to Steve Bender, assistant budget director for the state Office of Budget Programming and Planning, the governor and Legislature are taking all petition movements seriously. If any of these plans pass, "it will be a whole new ball game for state and local governments," Bender says.
While the Legislature may have its hands tied, local governments are looking at creative ways to survive without tax increases, according to Stanley Nicholson, director of Montana Fiscal Forums, which informs citizens about how their communities and state raise revenues and make expenditures. Nicholson says communities are working to broaden their tax base through job creation. They are also looking at ways to close tax loopholes and encourage greater compliance.
Several communities have discussed looking for some flexibility in taxing locally, for example taxing tourists to pay for infrastructure improvements, as the state allows some resort communities to do. "What is appealing about that is they don't have to send the money to Helena [the state capital]," Nicholson says. Other communities are looking at consolidating functions.
In addition, Nicholson says, public officials are often unduly restricted in their spending strategies by federal and state mandates, and there are not enough incentives to save appropriations. Some local governments are increasing fees on services, and public works expenditures are decreasing, Nicholson says.
With proposals to cut back or hold tax levels steady, the question of where new revenue will come from arises. Once natural resource severance taxes were vital to state revenues, now they account for only about 12 percent of revenue. For example, revenue from the coal severance tax has dropped over time from $80 million to $40 million, and oil tax revenues have plummeted from a high of $55 million to a current level of $15 million to $17 million annually. "We used to say this was our sales tax, but not any more," Bender says.
—Kathy Cobb
