When You and I Were Young, Whitefish*

By Bob Decker
January 31, 2009

* h/t Dorothy M. Johnson

On Friday, January 30, the House Tax Committee heard HB 312, sponsored by Rep. Bill Beck (R-Whitefish). Rep. Beck’s bill seeks to increase the maximum population for a town utilizing Montana’s resort tax from 5,500 to 10,000.

The resort tax was established in 1985. It allows communities that depend significantly on revenue from tourism to enact a sales tax on sales at hotels, restaurants, bars, ski areas, and other tourism-related retail sites. The tax requires ratification by local voters and has a 3 percent limit. It’s typically used to fund transportation projects, sidewalks, parks, and other urban improvement projects.

In Montana, the towns of Red Lodge, Virginia City, and West Yellowstone, along with Whitefish, utilize the resort tax to add revenue to their municipal budgets.

Rep. Beck said he introduced the bill because the population of Whitefish has grown rapidly in recent years and will soon surpass 5,500, making continued use of the tax impossible unless the law is changed. He said that the resort tax was popular in Whitefish because it provided property tax relief (taking 25 percent of the tax income) and built streets, sidewalks, and parks.

Several members of Whitefish’s political establishment, including the mayor, city manager, a local bank president, and a restaurant operator, made a good case for both the resort tax (it requires a tourism community’s out-of-town visitors to financially support the public services that tourists use) and Rep. Beck’s bill.

The sole person to testify against the bill was Don Huffman, a lobbyist for the Montana Tax Association. He said the Tax Association was concerned about raising the population ceiling and allowing additional Montana communities to take advantage of the tax. Yet, while Huffman spoke negatively about local option taxes, he said the Tax Association felt positively about the idea of a general sales tax.

The logic of the Montana Tax Association’s position wasn’t clear, but the end result of their preferred system is: they want a general sales tax, a regressive form of taxation that is particularly unfair to low-income people, but they oppose a more benign – and voter-endorsed – form of a sales tax that targets its payers, e.g., tourists placing significant demands on public facilities and services, with more fairness.

You can find a news story about the use of the resort tax in northwest Montana here, and you can see Montana’s current statutes on the resort tax here.