Billings Gazette: National sales tax a non-starter for Zinke, Daines, Tester

by Tom Lutey

Aproposed national sales tax is a nonstarter for three members of Montana’s congressional delegation unpersuaded by the bill’s promise to abolish the Internal Revenue Service.

U.S. Rep. Ryan Zinke, fellow Republican Sen. Steve Daines and Democrat Sen. Jon Tester said Wednesday that a federal sales tax has no place in Montana, one of only four states without a statewide sales tax. Tester, who pounced on the issue early, said in a letter to Senate leadership that he will kill the national sales tax if it survives the House.  

The Fair Tax Act of 2023 will receive a hearing in the House as part of the concessions made by Speaker Kevin McCarthy, Republican of California, to secure the necessary votes from hardliners in the House Freedom Caucus for his accession. The bill by Rep. Earl “Buddy” Carter, a Georgia Republican, would create a 30% national sales tax, to replace all corporate income taxes, the payroll tax, estate tax and taxes on gifts.

McCarthy told reporters Tuesday that he would vote against the tax. It takes just four “no” votes from the Republican caucus to kill any bill. Along with Montana, other states without a statewide sales tax are Delaware, New Hampshire and Oregon.

None of the four Republican reps from those states are listed as Fair Tax sponsors, including Freedom Caucus member Rep. Matt Rosendale, who didn’t respond to questions about his position on the 30% tax.

A combination of three reps from the non-sales tax states of Oregon and Montana, voting with McCarthy, would kill the bill in a floor vote.

“Rep. Zinke is no fan of the IRS but also doesn’t like the idea of a sales tax. He is not a sponsor of the bill. It has to go through regular order which means subcommittee and committee markups followed by floor consideration with open amendments process,” said Heather Swift, Zinke’s chief of staff on Wednesday. “Whatever bill ends up on the floor will be very different than what was introduced today. We will track that closely.”

The proposal to abolish the IRS was triggered by the 2022 Democratic controlled Congress voting to boost IRS funding to increase the number of employees in order to close the “tax gap.” It’s estimated that under-collected taxes annually amount to nearly $400 billion, according to the Joint Committee on Taxation.

The hiring was quickly spun into a deployment of 87,000 tax agents, though the bill authorizing the hires calls for employees, not agents. Agents comprise about 13% of the IRS workforce, according to the U.S. Government Accountability Office.

Immediately after securing his speakership after a 15th round of voting, McCarthy announced the 2023 Republican majority would “defund the 87,000 new IRS agents.” The new conservative use of “agents” as synonymous for all Revenue employees won’t to be letting up soon. A significant number of Senate Democrats would have to go along with House Republicans’ IRS defunding to make it happen.

In the Senate, Daines spokeswoman Rachel Dumke said he would work to reduce taxes, but wouldn’t be supporting a sales tax. Similarly, Tester said tax cuts for small businesses and families were the way to go. 

“As a Montanan, Sen. Daines is fundamentally opposed to a national sales tax while he works to reverse the tax hikes and the IRS’ new, supersized power to audit everyday Montanans which Senate Democrats, Nancy Pelosi, and Joe Biden passed into law last year,” she said.

Tester began the week calling a national sales tax a regressive tool that would increase life costs for Montanans. His remarks were made in a letter to Republican and Democratic Senate leaders.

“We don’t have a sales tax in Montana, and we don’t need the federal government imposing one on us. I am not going to let politicians in Washington, D.C., raise taxes on hardworking Montanans,” Tester said.

Montanans voting in the 1992 election recall a governor’s race between Republican Marc Racicot and Democrat Dorothy Bradley, which gave full debate to a statewide sales tax with both candidates willing to consider one. Racicot the following year was unsuccessful in gathering support for a sales tax, which voters rejected by referendum 3 to 1. In the 30 years that followed, the sales tax became an election year weapon.

In a 2011 poll commissioned by Montana Lee Newspapers, 64% of respondents opposed replacing the state income tax with a sales tax, while 25% supported the change and 11% weren’t sure. The opposition majority spanned gender and both political parties, plus independents.

But Montana’s population has increased by more than 300,000 people since the 1990 Census. The churn of people moving into Montana, while others exit, suggests a significant number of Montanans are accustomed to paying sales taxes in the states where they live previously.

National sales tax a non-starter for Zinke, Daines, Tester (