Knocking doors in House District 39, I keep hearing the same frustration from two very different directions.
Some neighbors think a sales tax is long overdue. Others are emphatically against it but feel stuck, like there’s no good path forward. But underneath both positions is the same concern: property taxes are too high, and our schools, roads, and public services aren’t getting funded well enough. That part, everyone agrees on.
So when I say I oppose a sales tax, I want to be clear that I’m not dismissing the problem. I live here too, and I feel it too. What I’m saying is that a sales tax is the wrong tool for a real problem. It would hit working families hardest, wouldn’t generate enough revenue to actually replace property taxes, and would put a new burden on top of problems we haven’t finished solving.
There are better ways forward. Below, I work through the most common arguments for a sales tax, because neighbors on both sides of this debate deserve a straight answer, not a talking point.
Frequently Asked Questions About Sales Tax in Montana
1. Why is a sales tax being discussed right now?
Montana’s property taxes have risen dramatically over the past several years. Two back-to-back reappraisal cycles, combined with surging home values during and after the pandemic, pushed residential property to represent 58% of Montana’s property tax base in 2023, up from just 35% in 1996. That shift put an increasing share of the tax burden on homeowners and renters while other property types, including large commercial holdings, picked up comparatively less.
At the same time, Montana’s economy has changed. Natural resource industries that once generated significant tax revenue have declined, while the service economy, remote workers, and tourism have grown. Some economists and business groups argue that a tax system built for the Montana of 1980 no longer reflects the Montana of today, and that a sales tax could capture economic activity that the current system misses.
There’s also an active push from some education advocates. A coalition including the Montana School Boards Association has explored using sales tax revenue as an alternative funding source for schools, though their plan has faced criticism for increasing overall tax collections rather than genuinely replacing property taxes.
So the conversation is real, and the underlying concerns are legitimate. Where I disagree is with the proposed solution.
2. Wouldn’t a sales tax make tourists pay their share?
This is the most appealing argument for a sales tax, and I want to take it seriously, because the concern behind it is legitimate. Montana hosts a record number of visitors. In 2024, roughly 13.8 million nonresident visitors spent approximately $5 billion in our state. They use our roads, our parks, our emergency services. It’s reasonable to ask whether they’re contributing enough.
But here’s what the state’s own analysts found: Montana’s nonpartisan Legislative Fiscal Division estimates that nonresident visitors would pay only about 12% of a typical general sales tax. The other 88% would come out of Montanans’ pockets, at the grocery store, the hardware store, the pharmacy.
Why so little from tourists? Partly because out-of-state property owners already contribute significantly through property taxes. They make up about 33.8% of Montana’s residential property tax base. And partly because consumer spending in Montana is dominated by residents, not visitors. The tourist dollars are real, but they’re not the majority of what a sales tax would capture.
If we want tourists to contribute more, we already have targeted tools that work: lodging taxes, resort taxes in communities like Whitefish and West Yellowstone, and entrance fees for public lands. Those tools can be expanded and improved without taxing every Montanan every time they buy a pair of work boots. That’s a smarter approach than a broad sales tax that makes Montanans pay 88 cents of every dollar raised.
3. Couldn’t a sales tax replace property taxes and lower my bill?
This is the version of the sales tax argument I hear most from people who are genuinely frustrated with their property tax bills, and I understand the appeal completely.
Here’s the math problem: Montana’s constitution caps any statewide sales tax at 4%. At that maximum rate, a sales tax would have generated roughly $1.31 billion in fiscal year 2024. Montana’s property taxes currently raise about $2.34 billion per year. That means even a sales tax at the highest rate the constitution allows would replace only about 55 cents of every dollar that property taxes currently raise.
A sales tax cannot replace property taxes. It can only supplement them, which means in practice, most proposals end up layering a new tax on top of a partially reduced old one. You’d be paying both.
Montanans have been skeptical of this swap for good reason. When former Republican Governor Marc Racicot proposed a sales tax in 1993, voters rejected it by 49 percentage points. The following year, they amended the Montana Constitution to cap any future sales tax at 4%, a limit that would take another statewide vote to change. Polling today consistently shows that most Montanans don’t believe a genuine tax swap would ever actually happen. They expect politicians to add the sales tax without truly eliminating property taxes. History suggests they’re right to be skeptical.
4. What about using a sales tax to fund schools?
School funding is a genuine crisis in Montana, and I take it seriously. Teacher pay, classroom resources, and the long-term stability of school budgets are all concerns I hear from parents and educators throughout House District 39.
But the specific sales tax proposal circulating among some education advocates deserves scrutiny. Rather than replacing an existing tax with sales tax revenue, the plan would use a sales tax to add new revenue on top of existing collections, increasing the overall tax burden on Montanans rather than shifting it. Critics across the political spectrum have called this out for what it is: using legitimate frustration about school funding as a vehicle to grow government revenue through a new regressive tax.
I want to fully fund Montana’s public schools. I just don’t think the way to do it is by charging working families a new tax every time they buy school supplies, winter coats, or groceries. There are better paths to adequate school funding, including making sure that wealthy property owners, large corporations, and high-income investors are paying their fair share under the taxes we already have.
5. So where do you stand?
I oppose a sales tax, statewide or local, for any purpose.
That’s not a position I hold out of habit or tradition. I hold it because the evidence is clear: a sales tax would hit working families hardest, would not generate enough revenue to replace property taxes, and would add a new burden on top of problems we haven’t finished solving. And it would do this while letting the wealthiest Montanans, those whose income comes primarily from investments rather than paychecks, off the hook.
Montana has real tax problems that need real solutions. A sales tax is not one of them. The solutions I support are targeted, fair, and within reach, and I’ll lay them out below.
6. Isn’t a sales tax regressive, and what does that mean for Montana families?
“Regressive” is a tax policy term worth explaining plainly: a regressive tax takes a larger percentage of income from people who earn less, and a smaller percentage from people who earn more.
Sales taxes are regressive because everyone pays the same rate, but a family earning $40,000 a year spends a much higher share of their income on everyday purchases than a family earning $400,000. The wealthy household has money left over after necessities; the working family does not. So the same tax rate hits them very differently.
Here’s something worth protecting: Montana currently has one of the least regressive tax systems in the country, ranking 38th most regressive out of 50 states. That means 37 states do a worse job than Montana of ensuring that lower-income households aren’t disproportionately burdened by taxes. That’s not an accident. It’s partly a result of not having a sales tax.
Adding a sales tax would move Montana in the wrong direction, making our system more like the states we’ve been smarter than. Our property tax system already has regressive elements that we need to fix. A sales tax would compound those problems, not solve them.
When I think about the neighbors I’ve met knocking doors in HD39, retired couples on fixed incomes, young families stretching every dollar, workers in trades and healthcare and education, a tax that takes more from them proportionally than from the wealthiest among us is not something I can support, regardless of how it’s packaged.
7. If not a sales tax, how do we fix the property tax problem?
Several tools are available, some already passed in part, some still waiting to be finished. Here’s what I’d prioritize:
Circuit breaker relief for homeowners and renters. A circuit breaker is a targeted property tax credit that activates when a household’s property tax bill becomes unaffordable relative to their income, protecting seniors on fixed incomes, working families, and renters from being pushed out of their homes. The 2025 legislature increased the elderly homeowner and renter credit, which was a step forward, but a broad circuit breaker covering all ages and income levels still hasn’t passed. More than 130,000 Montana renters were left without direct property tax assistance in 2025. That’s unfinished business.
Close loopholes for out-of-state second-home owners and large investors. The 2025 property tax reform made a good start by creating a homestead exemption that shifts more of the tax burden onto non-primary residences, including vacation homes and investment properties owned by out-of-state buyers. That policy direction is right. But enforcement and qualification standards need ongoing attention to ensure the relief actually reaches Montana residents rather than being captured through legal workarounds.
Strengthen levy limits. Montana already has a levy limit that restricts annual growth in property tax revenue, but it’s relatively easy to override and has allowed significant growth in nominal terms during high-inflation years. Strengthening that limit, while preserving the ability of communities to vote for additional services they want, would give homeowners more predictability and protection from runaway tax bills.
Make investment income pay its fair share. Montana currently gives investors a 30% credit on capital gains taxes, meaning people whose income comes from stocks, dividends, and asset sales pay a lower effective rate than people whose income comes from wages. In 2025, Democrats in the legislature brought forward a bill to reform capital gains taxation and make high investment income contribute more fairly to the public services we all rely on. Republicans killed it. Instead, the 2025 legislature cut income taxes in ways that saved high earners thousands of dollars while saving most working families only a few hundred. Getting investment income to pay its fair share is not only more equitable than a sales tax. It’s a more honest solution to the revenue problem.
8. What’s wrong with how investment income is taxed in Montana right now?
Montana taxes capital gains, the profits people make from selling stocks, real estate investments, and other assets, at a lower effective rate than ordinary wage income, thanks to a 30% tax credit that specifically benefits investors. Most Montana taxpayers effectively pay between 3% and 4% on capital gains, making Montana one of the more favorable states in the country for high-income investors.
This matters because investment income is disproportionately concentrated at the top of the income distribution. A nurse, a teacher, a plumber pays income tax on every dollar they earn from their work. A wealthy investor whose income comes primarily from stock dividends and asset sales pays at a preferential rate on that income. That’s a structural unfairness baked into our tax code.
The principle I support is straightforward: income is income. Whether you earn it by showing up to work every day or by holding a portfolio of investments, it should be taxed fairly. Reforming capital gains taxation to ask more of high investment income, particularly at the top, would generate meaningful revenue without touching the budgets of working Montana families.
This is not a radical idea. It’s the direction that Democratic legislators tried to move in 2025. The fact that it didn’t pass tells you something about whose interests the Republican supermajority was prioritizing.
9. Won’t taxing investment income hurt small business owners and farmers?
This is an important question and one I want to answer honestly, because it deserves more than a dismissal.
When a farmer sells land they’ve worked for decades, or a small business owner sells the business they built, the proceeds are treated as capital gains. A reform that taxes high investment income more fairly needs to be designed carefully so it doesn’t hit those transactions, which represent the life savings and retirement security of working Montanans, not the passive portfolio income of wealthy investors.
The good news is that this is a solvable design problem. Reforms can be targeted at high-dollar investment income above meaningful thresholds, and can include provisions that protect family farm sales, small business transitions, and other transactions where capital gains represent a working person’s life’s work rather than passive wealth accumulation.
The question isn’t whether to protect farmers and small business owners. Of course we should. The question is whether that concern should be used as a reason to do nothing while wealthy investors continue to pay preferential rates on passive income. I don’t think it should. I think we write the policy carefully, protect the people who need protecting, and ask more of those who can genuinely afford it.
10. What happened with property tax reform in 2025, and was that enough?
The 2025 bipartisan property tax reform was a real step forward, and the bipartisanship was the point, not just a happy coincidence.
Montana’s Republican supermajority oversaw two reappraisal cycles during which residential property taxes skyrocketed, and did nothing to stop it. They had the votes to act. They had the tools. They chose not to use them. It took Democrats joining with a handful of good-faith Republicans to pass the reform that finally began addressing what the supermajority had allowed to happen.
That reform restructured property tax rates to favor primary residences and long-term rentals, created a homestead exemption, and shifted more of the burden onto second homes and high-value investment properties. According to the Governor’s office, 80% of Montana homeowners saw lower property taxes as a result. That matters.
But it wasn’t enough. More than 130,000 Montana renters received no direct property tax relief. An all-ages circuit breaker, which would protect any household at any age paying more in property taxes than they can reasonably afford, still hasn’t passed. And the income tax cuts that passed alongside property tax reform were structured in ways that primarily benefit high earners, creating long-term budget pressure that could threaten the services Montanans depend on.
The work isn’t done. I want to finish it, starting with the Montanans who were left out.
11. What can a state representative actually do about this?
More than most people realize. State legislators set Montana’s tax code. They write the rules on property tax rates, capital gains credits, circuit breaker programs, and levy limits. Every policy I’ve described in this post is within the direct authority of the Montana Legislature.
Here’s what I’ll fight for in Helena:
- Legislation to establish a broad, all-ages circuit breaker that protects homeowners and renters who are paying more than they can afford.
- Reform capital gains taxation so that high investment income contributes more fairly to public services.
- Strengthen levy limits to give homeowners more predictability without defunding services communities have voted for.
- Close loopholes that allow out-of-state investors and second-home owners to reduce their tax burden while resident Montanans bear more than their share.
- Oppose any sales tax proposal, statewide or local, that would add a new regressive burden on Montana families.
- Fight to fully fund public schools and essential services through fair taxation rather than shifting costs onto working families.
I’ve lived in this district for more than 25 years. I know what rising costs feel like from the inside, not from a policy brief. When I talk to neighbors about property taxes and school funding and the cost of just getting by, I’m not talking about abstractions. I’m talking about our neighborhood.
The tax system should work for the people who live here, not for out-of-state investors, not for the wealthiest households, not for political convenience. If you want a representative who will fight for that in Helena, I’d be grateful for your vote and your trust.
— Melissa Smith, Candidate for Montana House District 39
Sources: Montana Legislative Fiscal Division; Montana Department of Revenue Biennial Report 2022–2024; Montana Budget and Policy Center (2025); Institute for Tourism and Recreation Research, University of Montana (2024); Montana Free Press Capitol Tracker; Bloomberg Tax (October 2024); Institute on Taxation and Economic Policy, Who Pays? 7th Edition.