Reality Check

A Broke State in a Booming Economy

State funding should not be generated on the backs of working Montanans due to unanticipated changes in industry

The state of Montana made it through the recession pretty well from a fiscal standpoint. State government was well funded, and a surplus of over $300 million existed at a time when most of us on the western side of the state were struggling to make ends meet. So, why, when the economy is booming, are we now broke?

State government is funded by a number of mechanisms, but it’s clear that when agricultural commodities do well and oil and coal markets are hopping, Montana reaps the benefits. However, when those industries suffer a terrible drought, or lack of production, Montana’s tax policy has no modifier to account for the deficiencies. And, of course, whatever revenue remains is largely income tax generated from Montana workers. When we are in a period of low unemployment, the income tax is somewhat reliable, but as we see now, it cannot sustain our state coffers. God help us if Montana gets hit by a disastrous tax trifecta that our current tax policy does not envision: agriculture and natural resources don’t recover, and unemployment increases.

Montana’s tax policy and accompanying legislation were built on the premise that the industries sustaining the state at the time of implementation (ag and natural resource development) would remain the primary economic drivers forever and always. Much to our collective chagrin, that hasn’t occurred. Our tax policymakers did not foresee the day when dot.com corporations would dramatically impact or put out of business community employers. They also did not foresee the dramatic boom in tourism as a key economic driver.

Every time we order food, clothing or other items from Amazon.com, tax revenues go unaffected, whereas, every time we shop at the local Albertsons, tax dollars are deposited into state coffers. Every time a tourist eats at a restaurant, it’s the waitress who is taxed, and her employer. There is a tragic irony in a waitress who can’t afford a vacation paying for the roads and bridges used by a tourist on vacation. But it’s the reality in our great state, due to antiquated tax policy.

Many policymakers look to a sales tax as a quick fix that other states have utilized, to lessen the income tax burden and property tax burden on state residents. But the failure of a sales tax as a solution is glaringly apparent: promises of decreased tax burdens on state residents haven’t been fulfilled in many states because governments refused to cut expenses when revenues decreased and looked to other taxable items (income and property) to make up shortfalls. So the burden was never lifted off residents; it was simply redistributed when another source of revenue (sales tax) was created.

Montana isn’t interested in false promises, and it certainly doesn’t benefit from tax policy created upon what is now a false premise. State funding should not be generated on the backs of working Montanans due to unanticipated changes in industry. Now is the time for the Legislature to act, when we are broke, but not yet broken by a disastrous tax trifecta that an antiquated tax policy could bring to bear.

Tammi Fisher is an attorney and former mayor of Kalispell.