The Senate Taxation Committee took no immediate action on House Bill 636, by Republican Rep. Dan Fuchs.

Montana voters rejected a 2 percent sales tax by a 70 to 30 percent margin in 1971 and turned down a 4 percent sales tax in 1993 by a 75 to 25 percent margin. In both of those special elections, the Montana Chamber of Commerce helped lead the support for the sales tax, while the Montana AFL-CIO spearheaded the opposition.

Unlike those two proposals, Fuchs said his sets up the first referendum on a sales tax in Montana in which voters could eliminate another tax if they adopt the sales tax. In the House, representatives said a special election in November would cost $1 million.

“It’s important we give Montanans the opportunity to vote on eliminating the income tax,” Fuchs said.

The combination of eliminating the income tax and lowering and potentially terminating the property tax on business equipment under a 1999 law would make Montana more competitive with other states in terms of attracting business, Fuchs said.

The sponsor said he hadn’t heard from Gov. Judy Martz about his bill, but recalled her campaign statements that she would support a sales tax only if another tax were eliminated.

Supporters included former Revenue Director and Rev. Ken Nordtvedt of Bozeman and representatives of the Montana Tourism Coalition and the Montana Chamber of Commerce.

Opponents included the spokesmen for the Montana AFL-CIO, Montana Society of Certified Public Accountants, Montana Taxpayers Association, Montana Education Association, Montana School Boards Association, state School Superintendent Linda McCulloch and Higher Education Commissioner Richard Crofts.

Lynn Madsen of Bozeman supported the bill, saying it “opens the possibility of additional tax collections from the millions of tourists that enjoy our state’s many wonders.” Steve Ellis of Ennis agreed, predicting the bicentennial celebration of the Lewis and Clark Expedition would lead to a 20-30 percent increase in tourism here.

Nordtvedt, a physicist, predicted if the income tax is eliminated, Montana will “have a renaissance of new business and expansion of business.” He said the only sales tax he would support would be one that wipes out another tax.

Montana Chamber of Commerce President Webb Brown supported the bill as a means to enhance the tax base with tourists’ dollars. Brown, however, said there are problems with the bill because corporations would still be subject to an income tax as well as the sales tax.

For the opponents, AFL-CIO chief Don Judge criticized Fuchs’ bill for “eliminating a tax based on the ability to pay and replacing it with a tax that’s not based on the ability to pay.” Under an income tax, Montanans can deduct their state income taxes from their federal income taxes, he said, but that couldn’t be done under a sales tax.

Sales tax aren’t allowed on electronic commerce or Internet purchases, Judge said, citing a study showing that state and local governments lost $525 million in sales tax revenue on $13 billion in Internet purchases in 1999, with sales expected to reach $1 trillion in 2010.

Crofts said higher education officials are concerned “about replacing a progressive tax with a regressive tax.” While not opposed to a sales tax, Crofts said it needs to be enacted as part of a comprehensive tax revision.

Jon Metropoulos, representing the CPAs, said, “The state has a low tolerance for a sales tax. Only every 10, 20, 30, 40 years will you get a chance. I would submit this bill is not in that condition yet.”

Another opponent, Bob Brastrup, said of a sales tax: “If you pay a little bit at a time, you never know how much you pay in total.”

Toby McAdam of Livingston, who has failed to qualify several state constitutional initiatives to replace most taxes with a 5 percent sales tax, criticized Fuchs’ bill, saying: “It’s just not going to do what it’s made out to be.”