ICYMI: Gianforte’s Sales Tax Lie Continues to Haunt His Campaign
Report Digs Deeper into Millionaire's Claim About Record of Supporting Sales Tax
Tester: Gianforte lobbied for a sales tax, 'no ifs, ands or buts about it'
Greg Gianforte’s record of lobbying for an unpopular statewide sales tax continues to haunt the New Jersey millionaire's struggling campaign for governor.
The Lee State Bureau today published an in-depth story that confirms Gianforte lobbied Gov. Judy Martz's Income Tax Advisory Council to create a statewide sales tax, which would force Montanans to pay more for the items they purchase each day.
Gianforte told the Council this:
"The best solution, because our competition's at zero income tax rate and zero capital gains, would be to replace the current income capital gains rate with a sales tax. Um, and I know that there are a few political issues and constitutional issues, but I didn't think I'd be fair in coming here and not saying that I believe that is the ideal solution."
Fast forward to Monday, when Gianforte berated a Montanan who asked about the testimony during a campaign event in Belgrade.
"I've never advocated for a sales tax," Gianforte lied.
"That's not true," the Montanan responded.
"Well you're wrong," Gianforte snapped, before adding, “You weren’t there, so you don’t know.”
But U.S. Senator Jon Tester, then a state senator serving on the Income Tax Advisory Council, was there.
“[Gianforte] solidly advocated for a sales tax,” Tester told the Lee State Bureau this week. “There’s no ifs, ands or buts about it. It’s there, it was 14 years ago but that’s how I remember it and I think the record confirms that.”
Lee State Bureau // Holly Michaels
Does he or doesn’t he?
Republican candidate for governor Greg Gianforte, who is running to unseat incumbent Democrat Gov. Steve Bullock, has been accused by Bullock of wanting a sales tax, even though in the so-called “406” tax plan Gianforte released the zero stands for, in part, no sales tax.
The idea of a sales tax is unpopular in Montana. A 2011 poll by Lee Newspapers showed that residents did not support one, with 64 percent opposing the idea only 25 percent supporting it. Voters in 1971 and 1993 decisively killed proposed sales taxes, and the Legislature has never passed an overall sales tax, though bills to do so have been introduced.
So how does Bullock and the Montana Democratic Party make that claim, even though it doesn't match with what Gianforte is proposing now? By using Gianforte’s own words from an income tax advisory council meeting in 2002.
On Sept. 29 the party released audio from a meeting 14 years ago in which Gianforte, then the CEO of RightNow Technologies, called a sales tax an “ideal solution from a high-tech perspective.”
Gianforte was testifying before then-Republican Gov. Judy Martz's Income Tax Advisory Council tasked with coming up with a proposal to reduce the state's income tax by 10 percent, reduce the effective capital gains rate and explore eliminating federal deductibility.
Since the release of the audio, Democrats and the Bullock campaign have hammered Gianforte over his testimony, saying he’s lying when he tells voters he’s never supported a sales tax. The state party has released more than 30 emails citing “Gianforte’s sales tax” with images showing how much things like groceries or shoes would cost with a statewide sales tax, encouraging people to share the image using the hashtag #salestaxgreg.
At the 2002 meeting, Gianforte acknowledged political roadblocks to implementing a sales tax, one of three ideas he presented. He said in 2002 it “may be politically impossible to do the wholesale change from an income tax to a sales tax."
Gianforte spokesman Aaron Flint this week said that Gianforte’s testimony before the committee was not advocating for a sales tax.
“He was lobbying the Legislature to lower the tax rates, which they eventually did,” Flint said.
Gianforte’s campaign has called the discussion of a sales tax during the meeting “hypothetical” and said Gianforte acknowledged at the time the political unlikelihood of Montana enacting a sales tax.
“There are huge political issues and constitutional issues” to a sales tax, Gianforte said in 2002. He also called it “politically untenable” and suggested the possibility of exemptions for farm equipment, before adding:
“But I didn’t think I would be fair in coming here and not saying I believe that this is the ideal solution to move to a consumptive tax that would focus more on maybe the tourism industry we have in the state. But if you want high-tech, our competition has zero income, zero capital gains. That’s an ideal solution.”
Gianforte then said: “Let’s assume for a second that’s an ideal solution,” before presenting two other ideas.
Montana’s tax code in 2002 made it hard, Gianforte said, to attract and keep qualified workers in the state. At the time, the state had a income tax rate of 11 percent, the highest in the nation then, and a 9 percent effective capital gains rate, the highest in the region.
Gianforte said a sales tax would make Montana competitive with other states that did not have as high of an income tax as Montana and create high-wage jobs that allowed the “next generation” to stay in Montana or return for work.
Gianforte, whose wife and daughter were at the 2002 meeting, said his move to Montana wasn't the smartest business choice but an “emotional decision" and that he intended to stay. “Now I view myself as a Montanan and I want to be on the team to create an environment that might attract more people and create the kind of jobs we want,” he said.
Flint this week said Gianforte’s tax plan presented to voters this year calls for no sales tax. "If Greg got a bill on his desk banning a sales tax, as governor he would sign it,” he said.
Democrats have countered that while Gianforte may not support a sales tax now, he is lying about his past support.
In audio provided by Montana Democrats, Gianforte told a voter in Belgrade on Monday "I've never advocated for a sales tax." The person at the tour said "That's not true," to which Gianforte said "Well, you're wrong."
Gianforte told the voter he said it was “politically impossible” and that he was “not in favor” of a sales tax. Audio from the 2002 meeting does not show Gianforte saying he was “not in favor” of a sales tax.
Montana Democratic Party spokesman Jason Pitt said Montana voters don't believe Gianforte.
"Gianforte can continue to lie to Montana voters ... but folks here see right through it," he said. "It is clear Montanans are genuinely concerned about Mr. Gianforte's record of advocating for sales tax, and pretending it never happened won't cut it."
Earlier this moth Bullock said if re-elected he would ask the Legislature to send voters a referendum to ban a statewide sales tax.
U.S. Sen. Jon Tester, D-Mont., who was a state senator representing Big Sandy in 2002 and attended the meeting, said it’s distressing to see Gianforte’s claims now.
“He solidly advocated for a sales tax,” Tester said. “There’s no ifs, ands or buts about it. It’s there, it was 14 years ago but that’s how I remember it and I think the record confirms that.”
Tester said he remembers the committee, which included Democrats, Republicans and Independents, heard the idea but didn’t pursue it.
“I’m sure we bounced that around but didn’t give it a lot of credence,” Tester said. “Montana voters opposed many times a statewide sales tax.”
Former Director of the Department of Revenue under Martz, Kurt Alme, who was at the meeting, said this week that Gianforte’s testimony was “helpful.”
“At the Senate hearing on Gov. Martz's proposal, Greg Gianforte's testimony was very helpful as we encouraged the Legislature to lower Montana's high income and capital gains tax rates. His efforts helped secure the lower tax rates all Montanans now enjoy."
At the meeting, Gianforte talked about what would happen if the company went public and employees, who owned 30 percent of RightNow in stock, wanted to sell it.
“We’re going to have a difficult decision in a couple years when this business morphs into something else and there’s going to be a $7 to $10 million personal incentive to leave the state.”
The advisory council ended up recommending a limited sales tax on goods and services which it said nonresidents bought more than Montanans, things like eating out, alcoholic beverages, rental cars and guided trips.
In 2003 the Legislature passed and Martz signed the Montana Economic Development Tax Act, which reduced the number of tax brackets, lowered the top bracket from 11 percent to 6.9 percent and gave a credit on capital gains of 2 percent by 2007, among other things. The act created a limited sales tax on accommodations and campgrounds and rental cars and increased taxes on cigarettes and other types of tobacco.
A report by the Montana Budget and Policy Center in 2009 said the act did not expand the state’s economy. A 2013 report by Dan Dodds, a senior economist with the Department of Revenue, in part says “any effect SB 407 had on the state economy appears to be smaller than the effects due to other influences.”
The department’s report also says the law didn’t increase the supply of labor and it’s unclear if it increased entrepreneurship.
“The evidence is consistent with increased employment due to SB 407 making Montana more attractive for unincorporated businesses, but lack of payroll data from before 2005 limits what can be said.”