Tax legislation meets stiff opposition; Legislature recesses until Monday

HELENA - The Montana Legislature was mostly idle Saturday, as concern grew over a proposed tax plan and legislative staff worked overtime to generate amended budget bills.

"We'll be coming back in at 10 a.m. Monday to hear House Bill 2," House Speaker Scott Sales announced on Saturday afternoon. "I don't think we really have any other business to attend to today."

That's because House Bill 2, the Legislature's spending bill, was amended Friday and was being redrafted by the legislative staff Saturday. The Legislature did pass an education bill and an energy bill before recessing the special session at about 3 p.m.

"I think we got a lot of the work done," said Deputy Minority Leader Bob Bergen, D-Havre. "And I think we've got an agreement on the tax policy issue."

But many Republicans, particularly those from the Flathead Valley, are washing their hands of the tax legislation, House Bill 5.

Bergren said he anticipates the bill will be amended in the Taxation Committee on Monday, but the committee's vice chairman, Rep. Jon Sonju, R-Kalispell, said it is flawed beyond repair.

Sonju met with Department of Revenue Director Dan Bucks on Saturday afternoon to negotiate changes to the bill, and came away with the impression that it would not be significantly changed.

The bill is a major component in an agreement reached between Gov. Brian Schweitzer's staff and a dozen Republican lawmakers in a meeting at a cabin just outside of Helena last weekend.

Sonju and Sales, R-Bozeman, both said the bill is laden with so much harmful tax policy that they would not support it even though it also contains tax relief provisions. Sales had pressed for tax rate reductions throughout the entire session.

"There's a lot of bad stuff in there and there's not a lot of tax relief," Sales said. "I'd rather not have paltry tax relief if it means we have to have this draconian tax policy with onerous regulations."

The bill contains Schweitzer's $400-per-household property tax rebate, a renter's tax credit of up to $120 per year and an exemption on property taxes on the first $65,000 of equipment owned by a business.

But it also includes "revenue enhancement" provisions that would require title companies to collect taxes when out-of-state residents sell land in Montana. It includes a statewide assessment on cellular phone companies that would effectively double their taxes, Sonju said, and it would allow the Department of Revenue to withhold a portion of money that is withdrawn early from a person's retirement account.

In a committee hearing on the bill, those provisions were roundly opposed by representatives from title companies, cellular companies and other business groups..

"I've gotten so many phone calls from business people in the Flathead telling me how this is going to affect their business," Sonju said. "When you have this many different business groups … in opposition to the bill, despite the carrots in it, I question the motivation behind the bill. Why are they penalizing businesses when we have a $1.3 billion surplus?"

Many legislators are unfamiliar with details in the bill because it has yet to clear the Taxation Committee.

Rep. Bill Jones, R-Bigfork, said he's not aware of the details, but he is "disturbed that we're talking about revenue enhancements when we have a surplus."

Jones was not among the Republicans who met with Schweitzer's staff last weekend, but he often votes with that group. He voted in the Republican bloc to pass the major education bill Friday and the governor's energy bill Saturday.

"There's two steps that I've supported them on right there," he said.

But Jones said he can't be sure how to vote on House Bill 5 until he sees it.

Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com