Democrats release audio of Gianforte proposing sales tax

HELENA – Republican gubernatorial candidate Greg Gianforte once called replacing Montana’s income and capital gains taxes with a sales tax an “ideal solution” that would draw high-tech businesses to the state, according to an audio clip released by the state Democratic Party leader Thursday.

Gianforte is in a close race against Democratic Gov. Steve Bullock in the Nov. 8 election, and the timing of the release was meant to influence Montana voters who have twice before rejected initiatives to institute a statewide sales tax.

Gianforte, in testimony before then-Gov. Judy Martz’s Income Tax Advisory Council in 2002, said Montana’s tax structure was hindering it from being a worldwide competitor in the technology industry because executives would not want to move to a state where they would pay high taxes.

“The best solution, because our competition’s at zero income tax rate and zero capital gains, would be to replace the current income and capital gains rate with a sales tax,” Gianforte said. “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.”

Gianforte testified as CEO of RightNow Technologies, the company he started in Bozeman and sold to Oracle in 2011 for $1.8 billion.

Montana is one of five states that don’t have a statewide sales tax, and the idea of implementing one is unpopular. A 2011 poll conducted by Lee Newspapers found that only one out of every four Montanans support replacing the income tax with a sales tax.

Opponents say a sales tax disproportionately affects lower-income families because such taxes are not based on income.

“A sales tax is an ideal situation for corporations and wealthy individuals like Mr. Gianforte, but it hurts the rest of (us) Montanans,” Montana Democratic Party Executive Director Nancy Keenan said in a news conference releasing the audio and minutes of the 2002 meeting.

Gianforte earlier this year released a tax plan in which he calls for no sales tax. His campaign said Bullock and his allies were using “scare tactics” to mislead voters about Gianforte’s proposal, and it criticized the governor for not releasing his own tax plan.

“Greg Gianforte laid out the 406 tax relief plan in April which will get our economy and revenues growing again while keeping the budget balanced,” said spokesman Ron Catlett. “The `0’ means no sales tax.”

Gianforte acknowledged in his 2002 testimony that it may be politically untenable to implement a sales tax in Montana. Instead, he suggested lowering the marginal income tax rate, giving high-tech firms capital gains tax relief and making up the difference in revenue through tourism resort taxes.

Martz eventually proposed lowering income taxes and replacing them with certain sales taxes that would target tourists, but her plan failed to pass the state Legislature in 2003. Statewide tax plans proposed in subsequent legislative sessions also were rejected.