Committee OKs big-box tax plan
HELENA - A bill that would tax "big box" stores is advancing to the full Senate for debate, to the chagrin of opponents who had hoped the bill would die in committee.
The Senate Taxation Committee approved Senate Bill 272 on a narrow 6-5 vote Thursday, clearing it for consideration by the full Senate.
The bill is of particular interest in the Flathead Valley since Costco has suspended its plans to build a new, larger store on U.S. 93 in north Kalispell because of the legislation's potential impacts.
A similar bill was narrowly defeated in the 2003 legislative session when Republicans held a majority in the Senate. While it appears to some lawmakers that the bill has a better chance this session, it still must meet the approval of the evenly divided House and Gov. Brian Schweitzer, who has pledged to veto any new or increased tax measures.
The bill's lead sponsor, Sen. Ken Toole, D-Helena, said he doesn't consider it to be a tax proposal and that's how he's pitching it in the Capitol. Toole considers it a "wage incentive" bill.
"We want to provide an incentive for this type of business to pay [employees] more and they certainly can afford to do that," Toole said.
Toole cites studies that have found that a disproportionate number of Wal-Mart employees relative to the general public rely on public services.
"When they don't pay people enough to live on, guess who makes up for it?" he said. "The taxpayers."
The bill would establish a tax of 1 percent on a store's gross revenues above $20 million. On a graduated scale, that tax would increase to 1.5 percent on revenue above $30 million and reach a maximum of 2 percent on revenue above $40 million.
Toole explained that a store with $21 million in revenue, for example, would pay the 1 percent tax on just $1 million rather than 1 percent on $21 million.
Because the revenue threshold is set so high, the tax would apply only to large retail or grocery stores such as Wal-Mart, Kmart, ShopKo, Home Depot and Lowe's.
Toole said the bill "is very much trying to get at that big box [business] model."
He said is well aware of the governor's opposition to new taxes.
"I will go and explain to the governor that this is not a tax," Toole said, but rather a taxation incentive to provide "living wages" to employees.
The bill was officially amended Thursday to accommodate Costco stores, which are known to provide relatively higher wages.
The legislation exempts stores that provide starting compensation packages of at least $22,000 and stores where at least 50 percent of the work force is full time. The original version required 75 percent of a store's work force to be full time to be exempt from the tax.
"We are appreciative of his efforts to recognize what Costco has done in terms of employee compensation, but we still think it's a bad idea," said Tom Ebzery, a lobbyist for Costco.
Ebzery said Costco executives will watch the Senate's deliberations on the bill "with great interest."
Brad Griffin, a lobbyist for the Montana Retail Association, said his clients oppose the bill because it singles out one economic sector. And because it's the only proposal of its kind in the country, there is concern that it will paint Montana as a state with a hostile business climate, Griffin said.
"I'm really disappointed that they passed it out of committee," Griffin said. "I don't think it's going to pass and I hate to see the Senate give such a misguided idea such a grand forum."
Griffin maintains that box stores, particularly those with thin profit margins, will not hesitate to pass on to consumers any costs that result from the tax.
But Toole rejects that claim, citing price comparisons conducted at national chain stores in different states with different tax structures. Those comparisons, he said, showed that prices do not vary.
But Griffin counters that the comparisons focus on a limited number of retail items in stores where there are thousands of items.
Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com