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A serious mistake or a hidden tax on property owners in Montana? – Daily Montanan [1]

['More From Author', 'July', 'Tom Towe']

Date: 2023-07-30  

After being told by the Department of Revenue that new appraisals would increase property taxes on homeowners substantially without an adjustment, the Republican controlled legislature did nothing.

Appraisals did increase by an average of 43%. The taxes will not go up 43%; the value of residential property is combined with the values of all the other property subject to property taxes. The number of mills is then determined by the revenue needed to cover the budgets. The Department of Revenue estimated that the average increase of residential property taxes will amount to 18%

What does this mean? Let’s take a home previously appraised at $200,000, $400,000, $600,000 or $800,000 in three cities in Montana. Without a legislative adjustment, the taxes would increase in 2023 as follows:

House valued at: $200,000 $400,000 $600,000 $800,000

Billings (16% increase) $235 $470 $704 $941

Bozeman (23% increase) $324 $648 $972 $1,296

Butte (30% increase) $454 $931 $1,396 $1,862

These increases then continue every year until a new appraisal comes out. The estimates are based on numbers supplied by the Department of Revenue. The budgets have not yet been determined so there may be some slight deviations. Whether it is $235 or $1,862 a year, this constitutes a significant tax increase, particularly on higher value homes.

Worse, virtually all of the extra money collected will automatically reduce the property taxes paid by the State’s largest corporations, companies, and businesses. When residential property taxes increase, other taxpayers don’t need to pay as much to meet the budgets of the local governments. This is a very significant tax break.

This could easily have been avoided by simply reducing the tax rate. In fact, every time there was a significant increase in the appraisals in the past—since the implementation of the new Constitution—the Legislature has made an adjustment of the tax rate. That number is now 1.35% of the fair market value of your home. By reducing it to 0.94% increase in appraisals would be exactly neutral. The revenue collected from the average homeowner would be exactly the same as last year assuming the county and local budgets were the same.

I have a master’s degree in law primarily in the field of taxation. I was in the Legislature for 20 years and on the taxation committee every session but one. For a number of sessions, I was the chairman of the Senate Taxation Committee. We always made an adjustment.

In the past, legislators of both parties knew that an adjustment needed to be made every time the Department of Revenue made a significant increase in the reappraised value of homes in Montana. Until this session, this adjustment was always done for a significant increase. It was the only fair thing to do.

There is no excuse for the Legislature not making this simple adjustment. There is no excuse for not doing the same thing that has always been done in the past. There is no excuse for not accepting the recommendation of Gov. Greg Gianforte’s Department of Revenue.

Republican legislators have responded that they provided a rebate in House Bill 222 of $500 for each homeowner for 2022 and 2023. They did. However, that is only 2 years or a total of $1,000. That does not help the person whose $400,000 home in Butte has an average increase of $931 every year, or an $800,000 home whose increase is $1,862 every year.

There are two possible explanations for the Republicans’ inaction. First, it was truly a mistake; the Republican legislators simply did not realize the importance of making this adjustment. If so, they need to admit their mistake and quickly agree to a one-day special session to correct it.

Second, it was intentional. The Republican legislators fully understood what they were doing. They genuinely wanted to hit homeowners for a huge residential property tax increase that would automatically reduce the property taxes of Montana’s largest corporations and business interests. If that is so, I suggest it would be a hidden tax increase on homeowners. If so, everyone should know what these Republican legislators and this Republican Governor have done.

Let’s assume it was a mistake and correct it before it is too late.

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[1] Url: https://dailymontanan.com/2023/07/30/a-serious-mistake-or-a-hidden-tax-on-property-owners-in-montana/

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