Speaking of Property Taxes. . .
Montana is getting hit with a massive increase in property taxes. The finger pointing is already beginning. Republicans are quick to say it’s not their fault. Legislator Greg Hertz (R-Polson), chair of the Senate Tax Committee, has an editorial floating around the state pointing the finger at local governments and, ironically, the voters themselves. Hertz says that taxes are increasing because local mill levies have been approved to support things like schools, libraries, police, and fire protection. Shame on us citizens for supporting basic public services, which the legislature under Republican control since 2009 have consistently refused to fund.
What the Republicans don’t say is that everyone knew this was coming. Not because local levies are passing all over the state (they aren’t), but because property values have been increasing dramatically. Your property tax bill is determined by your property value multiplied by your property tax rate and multiplied again by local jurisdiction mills. Most communities have not increased mills and the property tax rate has not changed. However, in most communities, the value of property has gone up significantly. That is the driver behind these increases. But Hertz and Republicans are quick to blame the voters.
Another thing the Republicans are not mentioning is that state government has been choking local governments for years, refusing to allow them to raise funds to cover services. Nowhere is the consequence of this more apparent than Great Falls and the proposed safety levy. No matter what you think of the levy, most people agree that many basic services in Great Falls are underfunded. The chickens are coming home to roost, and the city is asking people to approve a huge property tax increase. Given this controversy, the odds of that mill levy passing have declined dramatically.
The Republicans are also failing to mention the fact that they started this legislative session with a $2.5 BILLION budget surplus thanks to the Biden administration’s COVID relief efforts. Montana Republicans claimed credit for the surplus and swept a big chunk off the table for income tax rebates, up to $2,500 for joint filers. They also gave a maximum of $500 property tax rebate. Clearly the Republican program favors the wealthy.
One time “tax rebates” are usually more about politics than tax policy. Both Governors Brian Schwietzer and Steve Bullock had rebate programs, though not as big as the Republicans this time around. But rebates don’t change the fact that Montana’s tax structure is out of whack and far too dependent on residential property tax while being generous to the wealthy and big businesses.
The best way to make our tax system better is to increase income taxes on the wealthy and big corporations. Despite the fact that Montana is a relatively poor state, ranked number 34 in median household income, we are ranked in the top five for our “business friendly” tax environment by the conservative Tax Foundation. Hmmm.
The current controversy over property taxes carries with it two very concerning items. First, Republicans have always promoted a general sales tax in Montana which only pushes more tax further down the income scale, forcing people with less money to assume more of the cost of government. Second, people’s frustration with the property tax system can lead them to support “caps” like Proposition 13 in California which has decimated public services. Such a measure failed to gather enough signatures here in Montana in 2022, but a similar measure has already been submitted to the Attorney General for the 2024 election.
Department of Revenue will be holding meetings across the state to discuss the property tax increases Find the schedule here: https://mtrevenue.gov/pad-town-halls/#local
By Ken Toole:
NorthWestern Energy customers are about to get shocked with a huge increase in their electric rates if the Public Service Commission grants NorthWestern Energy’s request to increase residential rates. The public hearings are over and final legal briefs are being submitted. But, like a cancer waiting to metastasize, it has not gone away, and it will wreak havoc on the very people who can least afford it.
Don’t be fooled by efforts to minimize the impact of this rate case. Residential customers are facing a 28% increase in their rates compared to a year ago. And thanks to a “negotiated settlement” reached by the big guys (the utility, the state, and large customers) large users won’t see any increase at all. Bottom line this increase falls unfairly on small customers like you and me.
The average residential customer will have to come up with an additional $284 annually or more. Some people may be able to afford it. Some folks can go out and find another job to make ends meet but lots of people can’t do that…particularly Montana seniors. They will be choosing between paying their power bill, buying food, paying rent or purchasing medicine.
While we are waiting to hear how much residential rates will increase, large investors are buying up NorthWestern stock. On May 15 Market Beat reported that six “institutional investors” are increasing their holdings of NorthWestern stock. They are watching this rate case and they like what they see — for stockholders.
The corporate largesse doesn’t end with investors’ stock purchases. In 2022 NorthWestern CEO, Bob Rowe, received over $3.3 million in total compensation. Rowe, now retired, has been replaced by the former Chief Operations Officer, Brian Bird. In 2022 Bird made over $2.6 million. For comparison, Mark Johnson, the manager of the state’s largest electric co-op, makes a little over $450 thousand per year.
Why are these men smiling?
A reminder of Republican Senator Jeremy Trebas’ dirty dealings in a commercial building in Great Falls.
Jeremy Buys a Building
In May of last year, Jeremy put up a Facebook post announcing that he bought the old Church of Christ Scientists at 1300 1st Ave N. in Great Falls through a shell company, Rearview Mirror LLC. The building was purchased at a significant discount, because an automatic sprinkler system had to be installed to bring the building up to code.
Jeremy Scams on Property Taxes
The building has been classified by the Montana Department of Revenue as “exempt” because it had been a church. Jeremy rented the building to The Break Forth Bible Church, likely thinking this would preserve the property tax exemption. Problem is it doesn’t. The exemption requires that the building be owned by a church. He paid just $267 in property taxes for the first half of 2022. This for a 9,000 foot commercial building close to downtown. The property is still misclassified by the Department of Revenue. (Don’t worry folks, we’ll contact them).
Jeremy Goes to Helena (Can You Say Self-Dealing?)
Jeremy introduced Senate Bill 195 in the Senate. The bill exempted his building from being required to have an automatic sprinkler system. The bill was opposed by Fire Marshalls across the state and was heavily amended, removing all of Trebas’ language exempting his own building.
Jeremy Puts the Building Up for Sale. . . at an Inflated Price
Now, Jeremy has put the building up for sale on Craig’s List. Sale price? $475,000!
So let’s break that number down a little. The appraised value of the building is $359,505. Keep in mind that appraisals generally assume that the building complies with building codes and other legal requirements. In other words, they do not discount for needed repairs. But the market does and WTF406 is confident that Trebas purchased the building below the appraised value. Now, after failing to change the law to benefit himself, Trebas has a financial albatross hanging around his neck. Will he find tenants for the building? Will he find someone to purchase the building at his inflated price? We think the answer will be “no” on both counts. Too bad for Jeremy.
To read about the whole story follow these links to our previous articles.
The City Commission has decided to send the Safety Levy to the ballot. Commissioners previously sought a property tax increase of 191% to fund the levy, essentially doubling the city’s budget to support this single levy. Outspoken supporters of the levy, like Commissioner Rick Tryon, quickly changed their tune when met with negative feedback from citizens. Although they’re still out of touch with what homeowners in Great Falls can afford, the safety levy is headed to the ballot, asking homeowners to approve a 65% increase to their property taxes.
How Much Would the Levy Cost You?
The city has noted that a 65% increase would come out to about $156.00 for a $100,000 house and around $300 for a $200,000 house. . A quick look at Realtor.com shows that the average home price in Great Falls is far nearer to $300,000. Using a house valued at 100,000 is a useless example of how the levy would affect most homeowners. So why is the city intentionally downplaying the expected cost to homeowners? Put simply, they know we can’t afford a 65% increase any more than we could afford their initial 191% increase.
Now the city is also looking to spend $150,000 on a private firm to advocate for the levy. That’s right, they’re spending over $150,000 of OUR tax money in an attempt to ALSO raise our property taxes by 65% Combine the hefty PR price tag with the arguably misleading housing market numbers being provided, and it seems the Commission is well aware that their ask is not practicable, affordable, or popular.
What’s the Return on Investment?
With the city seeking such a major tax increase, it’s important voters know what exactly this levy will fund. Of particular note, the levy would add two School Resource Officers (SROs) to the budget, with a total cost of $230,000 to the taxpayers. However, multiple studies have shown that SROs in no way increase the safety of schools. Rather, their presence has been shown to be harmful to the student population, particularly students of color. The National Education Association reports, “Yet research shows that SROs do little to reduce on-campus violence or mass shootings, and their presence is often damaging to students of color and students with disabilities. Having SROs in schools can actually create higher rates of behavioral incidents and spikes in suspensions, expulsions, and arrests.”
Concerns regarding SRO treatment of BIPOC kids has held true nationally as well as locally, as detailed in the ACLU Montana’s Empty Desks report. Read the report here: https://www.aclumontana.org/en/edureport2019?fbclid=IwAR2fN3MP81uDSVu0pYqHpkJnzKX9RX7pcq_rG9ZFTRfNvW-WqUr9LebG8W8
Studies also show that more police does not necessarily increase community safety. There is no indication that increasing law enforcement’s budget will result in a reduction of serious crime in our city. While police respond to crime, preventing crime is done by increasing community resources, like access to treatment programs for substance use and mental health. Do we want to focus on punishing criminals, or preventing crime from happening in the first place?
Can Great Falls Afford Higher Taxes?
In addition to concerns with the allocation of levy funds, the fact remains that Great Falls citizens are simply overtaxed and underpaid. An emerging housing crisis has already exacerbated the Great Falls housing market, and a 65% tax increase could be the final nail in the coffin for homeowners on a fixed income. Voters already approved a county safety levy last fall. Schools and other vital services also routinely rely on levies to support the increased costs of meeting community needs. If this massive safety levy were to pass, it would likely mean disaster for future levy attempts for other entities, like our schools. If education and public services deteriorate due to lack of funding, we could create an endless loop of increased crime and increased police budgets with a city that isn’t any safer.
Put simply, Great Falls citizens don’t have extra cash to support a 65% property tax increase.
Which begs the question, why is the Commission pushing dramatic property tax increases on homeowners while simultaneously giving massive tax breaks to companies like Calumet? How did the city decide our budget could forego $2.77 MILLION DOLLARS from the refinery, and then turn around and ask homeowners to pay an extra 65% on their houses? Read about the city’s massive tax-gift to Calumet here: https://wtf406.com/2022/09/county-approves-another-tax-break-for-refinery/
So which is it Great Falls? Do homeowners need to pay 65% more to fund a levy? Or are we so well-funded that we can give big-businesses massive tax breaks? Perhaps Great Falls will have fewer safety needs when none of us can afford to live here? Vote for the safety levy, and we’ll soon find out.
Read more about law enforcement budgets and crime rates here: https://www.washingtonpost.com/politics/2020/06/07/over-past-60-years-more-spending-police-hasnt-necessarily-meant-less-crime/?fbclid=IwAR3zAGkTZhyOMV1Sa63vlNauBDoL_EDCBBPjV-WyKw1mjTierzMlSXbiW_U
Read NEA’s full article here: https://www.nea.org/advocating-for-change/new-from-nea/making-schools-safe-and-just?fbclid=IwAR38MFtEguiBy4ALAxSimI7LdbLUDz_04MU9L7GBZqRVaW0y13Lv9XSIImg#:~:text=Yet%20research%20shows%20that%20SROs,suspensions%2C%20expulsions%2C%20and%20arrests
Billings Republican Representative Sherry Essman is proposing a “fee” to be collected by city and county governments on a variety of non-profit organizations, including churches. Essman’s bill, HB 391, was heard in the House Taxation Committee on February 8th. Sixteen opponents testified against the bill. There were no supporters.
If enacted into law, the bill would provide that tax-exempt non-profits, ranging from educational institutions to health care providers to churches, would be required to pay a fee to local governments. The fee would be based on square footage of their building, which is exempt from property tax because of its non-profit status. The revenue would be spent on public safety and road maintenance.
During the hearing, Republican Representative Scot Kerns of Great Falls questioned the bill, saying that it was inconsistent with “local control.” It seems Kerns and other Republicans pick and choose what kind of local control they care about when it comes to other bills. (WTF406 has already written a story on Kerns’ connections to religious institutions https://wtf406.com/2022/10/separation-of-church-and-state-not-for-kerns/) A thorough analysis of the impact of the bill (called a fiscal note) has been requested but was not yet available.
This bill won’t go very far. It faces opposition from some big players in politics, like non-profit hospitals (Benefis and Great Falls Clinic) and churches. Still, it shines a light on how much tax exempt property affects local government.
By Ken Toole
The great thing about human beings is that we learn from past mistakes. Unless you are Governor Greg Gianforte and his Republican allies in the legislature. As the Governor rolls out his package of tax cuts, and legislators clamor to get on board, it seems that no one remembers the 2003 Montana Legislature and Senate Bill 407, Judy Martz’s big tax cut plan that failed to deliver on its promises.
But before getting into the lessons from Senate Bill 407, let’s refresh ourselves on the economic theory that is driving Republicans to promote big tax cuts for the wealthy. It’s called “trickle down” economics. The idea is to give tax cuts to wealthy people who will then hire more people and pay more taxes which will lead to a better world. It turns out that cutting taxes on the wealthy just allows them to put more dollars into things like stock buybacks, offshore accounts, and other financial mechanisms that simply make them richer and do little for community investment. Even though most economists have debunked “trickle down economics,” Republican politicians cling to it as an article of faith and continue to promote it.
Now, back to 2003 and Senate Bill 407. Judy Martz was the Governor, and Republicans held majorities in both houses of the legislature. Then as now, Republicans were supremely confident that tax cuts result in increased revenue by stimulating growth. So they passed significant reductions to capital gains taxes and the income tax rates paid by wealthy individuals.
Specifically, SB 407 reduced the tax rate on top income earners (that’s tax speak for rich people) from 11% to 6.5%. It also created a 1% tax credit for capital gains income (that’s tax speak for money people make selling things like stock and real estate). Sounding familiar? Gianforte is proposing to reduce the top income tax rate along with giving a tax credit to people paying capital gains taxes.
But the real story about SB 407 is just how wrong the projections of the effect on public services and state revenue turned out to be. It ended up costing more than its promoters promised. . .lots more. In 2011 the Department of Revenue conducted an analysis of the fiscal impact of SB 407. Among other things the analysis concluded that the cut in income tax turned out to cost more than three times the projections during the 2003 legislature. The cost of the capital gains tax cut was double the projections. That meant much less money available for schools, local governments, and basic public services. Not surprisingly, the analysis also showed that the beneficiaries of these tax cuts largely turned out to be rich people.
So, here we sit in 2023, just like 2003. Republicans control both houses of the legislature and the Governor’s Office. And just like 2003, these politicians seek to cut taxes mostly on rich people. But there is a big difference as well. In 2003 the state was facing a budget crisis. Thanks to Joe Biden’s American Rescue Plan Act, in 2023 we have a big budget surplus and, along with that, we have the opportunity to invest in our institutions and infrastructure. While rural nursing homes are closing across the state, while the State Hospital is crumbling before our eyes, while cities and counties are struggling to make ends meet, while schools are hard pressed to find qualified staff, why would we make it a priority to give tax breaks to the wealthiest among us before those problems are addressed? The answer from the Republicans is, “Just be patient. It will all trickle down.”
Ken Toole was a member of the Senate Tax Committee in 2001, 2003, and 2005. He served as the vice chair in 2005. He served on the Public Service Commission from 2007 to 2011. He was also the President of The Policy Institute, a private group which conducted research on economic issues including taxation.
