Trego's Mountain Ear

Montanans are once again being told that a statewide sales tax would reduce—or even replace—property taxes. It’s a promise that sounds appealing, especially as property tax bills continue to rise. But it’s a promise we’ve heard before, and one that has never held up under scrutiny.

The reality is simple: taxes do not disappear. They stack.¹

Property taxes fund local obligations such as schools, counties, fire districts, hospitals, and bonded debt. Those obligations do not vanish if the state creates a new revenue stream. There is no provision in Montana law that automatically reduces property taxes when another tax is added. Any reduction would require future legislative action, subject to political pressure, budget shortfalls, and shifting priorities.²

Across the country, the pattern is consistent. When governments add a new broad-based tax, the old ones quietly remain.³ Montana is not immune to that reality.

Another claim often made is that a sales tax would primarily be paid by tourists. The data does not support that assertion. Tourists already contribute through bed taxes, fuel taxes, rental fees, and other user-based charges designed specifically to offset the costs of tourism.⁴ A general sales tax, by contrast, applies to everyday purchases—groceries, clothing, household goods, and school supplies—items overwhelmingly purchased by residents.

Economic modeling consistently shows that the majority of a statewide sales tax would be paid by Montanans themselves: working families, retirees, and small business owners.⁵ The idea that visitors would shoulder the burden is more marketing than math.

Montana would also give up one of its few remaining economic advantages: no sales tax. Border communities benefit daily from out-of-state shoppers who cross state lines because it is cheaper to spend money here.⁶ The moment a sales tax is imposed, that advantage disappears. At the same time, Montanans living near state borders will begin shopping elsewhere, exporting local dollars out of state.

Sales taxes are also regressive by design. They take the same percentage from every purchase, regardless of income. That means lower-income households pay a higher share of their earnings than wealthier households, while investment income and large asset holdings remain largely untouched.⁷ The impact is felt most acutely at the checkout counter, not in investment portfolios.

Small businesses would feel the pressure as well. A sales tax requires businesses to act as unpaid tax collectors—tracking taxable items, filing reports, managing compliance, and absorbing audit risk.⁸ These administrative burdens come with real costs, while the state expands enforcement and bureaucracy to manage the system.

In Montana, this debate is not merely economic. It is constitutional.

Article VIII of the Montana Constitution governs taxation, and it does not authorize a general statewide sales tax.⁹ That omission is intentional. Montanans have rejected sales tax proposals multiple times because once a tax is constitutionally allowed, control shifts away from voters and toward the Legislature.¹⁰

To enact a statewide sales tax, lawmakers would need to amend the Constitution or pursue statutory changes that eventually force a constitutional rewrite. Under Montana law, legislators can propose constitutional amendments with a two-thirds vote and send them to the ballot.¹¹ Once approved, rate-setting authority moves to Helena.

Even so-called “caps” are not permanent. Constitutions can be amended again, and today’s small percentage is not tomorrow’s limit.¹²

History matters here. Montana voters have consistently understood a basic truth: property taxes do not go down when new taxes are added. They simply find new ways to rise.¹³

This is not just a debate about a sales tax. It is about preserving the constitutional restraints that still exist between the people and an expanding government appetite. Once those restraints are weakened, there is no easy way back.

For that reason, and for many others, Montanans have said no before—and the facts suggest they are right to say no again.

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Sources & Citations

1. National Conference of State Legislatures (NCSL), Principles of State Tax Policy and Revenue Stability
2. Montana Code Annotated, Title 15 (Taxation); Montana Department of Revenue, Property Tax Structure Overview
3. Government Accountability Office (GAO), State and Local Government Fiscal Outcomes Following Tax Base Expansion
4. Montana Department of Revenue, Lodging Facility Use Tax Annual Reports
5. Institute on Taxation and Economic Policy (ITEP), Who Pays State and Local Sales Taxes
6. Federal Reserve Bank regional studies on border tax differentials and consumer behavior
7. Institute on Taxation and Economic Policy (ITEP), Sales and Excise Taxes Are Inherently Regressive
8. U.S. Small Business Administration, The Cost of Tax Compliance for Small Businesses
9. Montana Constitution, Article VIII (Taxation)
10. Montana Secretary of State, Historical Ballot Issues – Sales Tax Proposals
11. Montana Constitution, Article XIV (Amendments)
12. National Conference of State Legislatures (NCSL), Amending State Constitutions
13. Montana Legislative Fiscal Division, historical revenue and tax burden analyses