But the three-factor system is out of date, argued Beatty, and was designed to conquer an economy based on production, transportation, and heavy industry. As the economy shifts more towards services and sales, all but five states have abandoned the three-factor system in favor of a system that deals only with sales.
“This finally gives us a round pen to stick in this 21st century round hole,” Beatty said. By removing payrolls and property from the equation, the tax number will be more likely to include multi-state businesses selling to Montana.
Hertz, who describes large ecommerce companies that sell online and then ship here, but few, if any, employees or real estate would raise their average taxes.
Brian Aegerter, general manager of Applied Materials in Kalispell, said his company owns a large lot and spends millions on payroll, but is shipping the semiconductors the company makes outside of state. The change in tax law would save the company about $ 1.5 million annually and make Kalispell the best choice for reinvestment and expansion, he said.
Other proponents of the bill felt it would simplify tax law and make Montana more regionally competitive when it comes to attracting the industry.
SB 181 saw a number of adversaries too, but any changes felt could be made to palatable.