But every time a new tax is proposed, such as the local option sales tax, the question needs to be asked: what tax will this replace or alleviate for Montana taxpayers?
There is no question that sales taxes have many advantages over other taxes:
They tax everyone, including those in the "underground economy."
They are relatively steady from year to year (as opposed to income taxes, which result in wildly fluctuating revenues based on economic cycles.)
They are simple to collect.
There are no loopholes for the ultra rich to exploit (like the Kennedys and their family trusts in Fiji to avoid paying the inheritance taxes that Teddy Kennedy always wants to raise.)
They generally do not involve double-taxation, etc...
So why the opposition to the local option sales tax if sales taxes are such good taxes? Many reasons.
First, they will not be enacted as part of an overall tax reform in Montana that will alleviate high property tax and income tax rates.
Second, rural Montanans will pay the taxes and not get any of the benefit. There are proposals to try to distribute part of the revenues to rural areas, but working that out in a fair way would be a nightmare.
Third, unlike resort taxes, they will not be gaining the bulk of their revenues from out-of-state travellers, which is part of what many in Montana want to capture.
In general, states and local communities should be free to enact whatever taxation that they want to. The state, however, needs first to create a low-tax climate in general. On that framework, local communities can add their own taxes, deciding if they want to have a reputation as being a high-tax community.
To take a complete turn in a selfish direction, Billings in particular needs to think hard about whether to support sales taxes, because of the large amount of shopping that is done here by residents of Wyoming. Part of the appeal is the wide array of shopping, service, and entertainment options here in Billings, but a big part is also the fact that there is no sales tax here. Even North Dakotans come to Billings to shop, and some southeastern Montanans find it just as convenient to shop in Rapid City, if not more so. Adding a sales tax would cause the loss of some business.
The same is doubtless true for towns and cities anywhere along the states very long border.
