Why Penalize Investors?
By Evelyn Pyburn
One of the first experiences of having launched a new business, 40 years ago, was a requirement to annually fill out a form for the county tax collector, listing all the equipment and furniture that was part of our business. The purpose was to pay “personal property taxes,” now commonly called “business equipment tax,” but originally, most everyone had to pay a tax on their furnishings, whether they were in business or not.
Filling out the form was simple because we didn’t have much – a used desk, a couple chairs, and two new file cabinets.
Not having much capital to start a business, we were creative in making do with what we could find. Bear in mind that this was before computers, so layout and design was a matter of physically piecing things together. Ideally, a light table would have been nice, but we couldn’t afford that. Our solution for a large layout surface was to use an old flat door supported by the two cardboard boxes in which our new file cabinets came.
As a new business we couldn’t afford the equipment we needed but state and county governments expected us to pay taxes on everything we did have. And, no, we were not small enough to be exempt – no one was exempt.
Some time after submitting our tax form I got a call from the county tax office, a woman who wanted to go over our statement. She asked at one point if there was anything I hadn’t written down. I then mentioned our flat door and cardboard boxes, which perturbed her, and I don’t think she believed me. She became quite indignant, and said, “What about your printing press?”
I was dumbfounded and had to laugh. No small newspaper owned a printing press any more, I told her. They send their layouts to a central printing company, which — even today— prints most of the newspapers for a large region.
For her to have taken it upon herself to challenge a business about what equipment they had, one might have expected her to take it upon herself to become educated about what such a business did and what they might actually have for equipment.
But she was, and still is, not alone in not being educated about what it takes to start a business – the fact that the state has such a tax at all speaks to the fact that many people are equally as uneducated; but not knowing what they are doing has never given them pause.
A business equipment tax is directly aimed at killing the goose that lays the golden egg, and for a long, long time Montana has been beating that goose to death. While lessened to some extent, the tax still remains as a barrier to greater prosperity for Montana.
I recall hearing a comment at a manufacturers’ convention a number of years ago from a new manufacturer who had come to the state to manufacture pasta. He expressed deep disappointment that no one had told his company about the business equipment tax. He didn’t know about it, he said, until he opened the mail one day, which included an envelope with the form to be filled out. He then made the point that they would not have located in Montana had they known about the business equipment tax. He didn’t know about the tax because he had never heard of a state imposing such a tax.
Another speaker at another meeting, who was a national specialist at saving a struggling business from going bankrupt, also expressed astonishment at having discovered that Montana had such a tax. Having to pay the tax, whether making a profit or not, essentially spelled doom for any marginal business with lots of expensive equipment.
Business equipment taxes are hostile to economic development – to growing an economy – to creating new wealth. What kind of state does that? Montana does that and it will probably continue even though there will undoubtedly be efforts to try to raise the exemption level during the next state legislature.
Over time, some improvement has been made in reducing the tax, but it has been an uphill battle.
Common sense says the tax should be completely eliminated, except for people who don’t know what they are doing. They are willing to “welcome” businesses who want to invest up to $300,000 in the state, but they most aggressively want to penalize anyone investing more. Is it any wonder that manufacturing enterprises that want to be close to the development of energy, almost always chose to locate on the eastern side of the state border at Williston?
How can anyone not know that business development and growth is the source of all taxes, most jobs and all new wealth? Every dollar left in a business will do much more for a community than any dollar transferred to government, no matter how it’s spent by government.
One of the things we all should have been able to see over the past couple of years in Montana is what happens to tax collections of all kinds when there are more businesses – businesses that are making a profit. Montana has a gargantuan surplus in tax revenues — the largest in history, because our economy– our businesses — are thriving. While there are other factors at play, none would make such a difference if it weren’t for thriving businesses in Montana. The past couple of years have clearly demonstrated for all to see what it takes to really generate the revenues that people want for government – strong, profitable businesses.
Gov. Gianforte announced that raising the $300,000 exemption level is one of his priorities for the next session of the state legislature. The news reports make sure that everyone knows that it is Republicans, not Democrats, who want to do that as though it is a terrible thing. It is quite amusing, since it seems to say that Democrats are opposed to business investment in the state. Opposed to having a strong economy. Opposed to generating new wealth. Opposed to having tax revenue surpluses. One would think there would be Democrats who would object – and maybe they are. Maybe that’s why the party had trouble fielding candidates in the coming election.