By Ken Toole
I’m writing to respond to a recent opinion column from Brendan Beatty, the Montana Department of Revenue Director, explaining the property tax mess in Montana. I’m still trying to decide if he really doesn’t understand the property tax system or if he is engaging in an lame attempt to provide cover for the Republican legislature and Governor’s office.
Though everyone talks about how complicated property taxes are, the basic framework is simple. Your property tax is determined by the value of your property times the state tax rate times mills levied by state and local governments. We all understand that property values are going up dramatically, and there isn’t much we can do about that. Changing mills is also difficult, because many of the mills are statutory and the remainder depends on local governments acting.
But we can control the state tax rate people pay for residential property.
By doing nothing, the Governor and supermajority Republicans ensured that residential property taxes will increase while other classes, that are already getting hefty tax breaks from the 2023 Legislature, will see their taxes drop even more significantly.
We have seen rapid appreciation of values before. In the past, the legislature has addressed increased values by reducing the state residential property tax rate. Everyone knew this was coming, and there were several bills in the legislature to address the issue this way. In their wisdom, the Republican supermajority decided not to act.
Surprisingly, Beatty’s editorial only addressed the mills portion of the equation. There’s a reason for that.
There are currently 18 different classes of property in Montana. Each one is taxed at its own rate. Imagine a big pie with 18 slices. The increased residential values is essentially adding more filling to one piece of that pie – our residential property taxes. We can’t make the pie much bigger because of caps put in place by the legislature. The only option is to shuffle things around within the pie. But if you do that, you end up increasing the size of other pieces of pie, and their taxes go up. When the value of residential property increases like this and you leave the tax rate for residential property the same, other classes of property end up paying less.
By refusing to adjust the residential tax rate, the Governor and legislators protected corporate property payers like NorthWestern Energy and Burlington Northern while letting residential property taxes increase dramatically. Imagine that!
Now let’s talk a little about politics. There are numerous organizations dedicated to representing other classes of property. Those organizations have things like offices, budgets and lobbyists. Naturally these folks don’t want to see their state property tax rate go up. There is no organization for residential property taxpayers.
Importantly, the priority of the Republicans has always been to protect and promote corporate interests. They have reduced business equipment taxes, capital gains taxes, taxes on investment income, and on the list goes. All of these things have increased taxes on the rest of us and reduced the quality of our public services. The only tax they like is a general sales tax which falls heavily on consumers.
We can’t change the increase in residential property values. The state mill part of the equation is mostly statutory and difficult to change. If you eliminate the option of changing the tax rate for residential property because you don’t want to increase taxes on corporations, you are left with reducing local mills. That means pointing your finger at local governments, and somewhat ironically, the voters themselves.
That’s exactly what Republicans are doing.
Like cats in a litter box, the Gianforte administration and Republican legislative leadership are scrambling to cover their mess. The increase in residential property taxes isn’t a surprise. It isn’t an accident or oversight. They knew this was coming, and they refused to do anything about it, because their priority is taking care of corporate board rooms.
Ken Toole served on the Senate Taxation Committee 2001 and 2003 and was the vice chair of that Committee in 2005. He also served on the Revenue and Transportation Interim Committee in 2005. He was elected to the Montana Public Service Commission in 2006. He was the founder and Executive Director of the Policy Institute, a Montana Non-profit group that worked on tax and energy policy in Montana. He now has a small farm outside Cascade and writes occasionally for WTF406.com a political blog in Great Falls.
Originally featured in The Daily Montanan here: https://dailymontanan.com/2023/07/26/big-corporations-get-tax-benefits-while-montana-resident-get-higher-property-taxes/