The upcoming legislative session is expected to see numerous proposals to tackle the increase in property taxes. As Republican Gov. Greg Gianforte’s property tax task force wrapped up its recommendations this week, legislative Democrats have also presented their own plans, while the governor’s challenger in the upcoming election has a proposal of his own.
In the last two years, Montanans have experienced a significant rise in the assessed value of their homes, resulting in a corresponding increase in property taxes, averaging a statewide jump of 21%.
This has sparked frustration across Montana and a call for solutions from lawmakers in the upcoming session starting in January. There’s been a lot of blame being thrown around, with Gianforte pointing fingers at local county budgets, while commissioners argue that they are restricted by the state in their ability to levy taxes. Minority Democrats criticize majority Republicans for failing to pass any substantial legislation, and Ryan Busse, the Democratic gubernatorial candidate, blames Republicans for failing to pass a bill to adjust tax rates for different property classes.
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During the final meeting of his property tax task force on Thursday, Gianforte expressed his support for one of the group’s proposals—a homestead and “comstead” exemption aimed at reducing tax rates for primary residences, long-term rentals, and smaller commercial taxpayers. However, this would result in increased taxes for non-primary residences, short-term rentals like Airbnbs, and larger commercial properties, as the total amount collected in property taxes by the state remains the same. The meeting coincided with the day Montana homeowners could begin applying for property tax rebates passed in the last legislative session and funded from a surplus.
State Rep. Llew Jones, who led the task force subcommittee that developed the proposal, stated that the plan would lower taxes for the affected properties by approximately 15-20%, impacting around 215,000 primary residences, 130,000 long-term rental properties, and about 32,000 small businesses.
Jones explained that the proposal aims to ensure that individuals who do not reside in Montana full-time but utilize public services and infrastructure in the state contribute to providing some of the services they benefit from.
Gianforte voiced his support for the proposal, emphasizing the importance of maintaining the preference for Montana residents and their primary homes. He highlighted the long-term relief it would provide and the necessity for out-of-state property owners to pay their fair share for services like schools, law enforcement, roads, and emergency response.
However, task force member Jeremy Horpedahl expressed dissent regarding the proposal, pointing out the potential increases in taxes for second homes, short-term rentals, and large commercial properties. The report from the task force suggested that taxes for those properties could rise by 25-45%. Additionally, depending on the mix of properties in a taxing jurisdiction, taxes on agricultural or centrally assessed properties may also increase to meet revenue needs.
The task force introduced several other proposals, all of which would require approval during the upcoming legislative session.
In the education sector, State Rep. David Bedey highlighted a proposal that would transition school levies from district-wide to countywide, aiming to ensure uniform levy rates across all districts in a county to meet the mandatory local share of school funding equitably.
“This represents a significant step towards equity,” Bedey stated, noting that initial calculations indicated reduced levies in at least 69% of school districts, with the burden shifting from poorer to wealthier districts.
From the local government subcommittee, State Sen. Greg Hertz emphasized a proposal that would limit local mill levy elections to dollar amounts instead of mill amounts. This approach aims to prevent windfall gains when property values increase, ensuring stable property taxes for voters and taxpayers across Montana.
Earlier this summer, Democratic legislators in Montana unveiled their set of property tax proposals geared towards reducing property taxes by $230 million. They highlighted the targeted nature of their ideas on lower and middle-income Montanans in contrast to the governor’s proposals.
One of the key components of the Democrats’ plan is a homestead exemption that would exempt the first $50,000 in value of a home and $200,000 for a small business.
The Democrats also proposed reforms to how taxes are calculated on residential properties, with higher-value properties being taxed at a higher rate. Senate Minority Leader Pat Flowers emphasized the aim of taxing properties at different rates to provide relief to working individuals and ensure higher-priced homeowners pay their fair share.
Additionally, Democrats proposed a housing fairness tax credit to assist individuals whose property values and taxes have risen substantially compared to their incomes, including renters.
“The tax credit, combined with the homestead exemption and fair tax rates, will ensure that no one falls through the cracks,” said State Rep. Jonathan Karlen.
Flowers outlined that the Democrats’ proposal would not significantly impact counties or schools and would be funded from a projected surplus in the upcoming legislative session. The proposal also aims to address loopholes in commercial and industrial taxes to help balance the budget.
Democratic governor candidate Ryan Busse also introduced a plan to reduce the residential property tax rate from 1.35% to 0.94%, proposing a simple solution that was overlooked by Gianforte and legislative Republicans in the last session.
“It’s a straightforward approach—reduce taxes, reduce red tape, and lower the tax rate. This is a simple step that should have been taken in the last legislative session but was ignored,” Busse stated.
Former Democratic Gov. Brian Schweitzer criticized the Legislature for not adjusting the rate, resulting in substantial tax breaks for companies like NorthWestern Energy and Burlington Northern Santa Fe railway.
Busse’s plan focuses on adjusting property class rates, with a willingness to consider other viable options if elected.
Graybill, Busse’s running mate, dismissed arguments from Republicans about the complexity of adjusting tax rates, stating that the previous adjustment functioned effectively and did not pose major challenges to businesses or agriculture.
Schweitzer and Busse also criticized a proposal from the task force that would require new voter-approved levies to garner a 60% affirmative vote. They labeled it as anti-local control and raised concerns about reducing voter input in local government budget decisions.
The final report from the task force also drew dissent, questioning the barriers imposed by increasing the vote requirement for mill levy elections and its implications on local government budget choices.
Holly Michels is the head of the Montana State News Bureau. You can reach her at holly.michels@ lee.net
“Working together with the homestead exemption and the fair tax rates, the tax credit will serve as a backstop to make sure that nobody falls through the cracks.”
State Rep. Jonathan Karlen, of Missoula
