In a historic turnabout, Montana’s property tax reappraisal map flopped west to east. Eastern Montana counties, rich in oil and gas revenues, will experience increases in homeowner property valuation. Western counties, still recovering from the recession six years later, will see decreases. Statewide residential values dropped nearly 3 percent.
In the last nearly six years, home valuations in Flathead County fell nearly 15 percent while home valuations in Richland County soared more than 100 percent. Comparing home values in the Flathead to those in Richland is awkward, given the starkly disparate base values of the regions. But this reappraisal scenario has never happened before and the turnabout will make for fascinating tax politics.
The estimated residential tax change in the Flathead is below 2 percent while increases in Richland are over 64 percent. Neighborhood location, and a whole bunch of other criteria, ultimately dictates actual valuations come June.
In what appears as great news for homeowners is also tough news for local governments like Flathead County and Kalispell. Loss of services to libraries, police protection and streets are unlikely given local governments’ ability to increase mill levies to maintain budgets with inflation.
This inflationary law assures that the high growth gains built into government budgets over the previous 6 1/2-year reappraisal is the new base from which overall county budgets begin. Most Flathead homeowners are likely to see pennies on the dollar in tax decreases forthcoming.
But these early estimates are based upon medians and averages, and don’t yet account for Legislative political shenanigans. There will be dozens of property tax fixes proposed come January.
In both chambers of the 64th Legislature, eastern Montana is strongly positioned. The perceived west-to-east shift in school equalization taxes won’t likely be appreciated in places like Sidney. House and Senate leadership will assure that eastern Montana does fine. Eastern Montana schools already do well with oil and gas revenues pouring into select budgets.
Oil and gas revenues in budgets have kept some homeowner property taxes lower for decades. That’s strikingly similar to tourist taxes in cities like Whitefish that reduce property tax bills by big amounts.
In the previous reappraisal, thousands of property owners protested their taxes. It proved a train wreck of confusion for the 2011 Legislature, which appeared baffled by the mathematics of tax mitigation.
New clarity may also avoid the 64th Legislature, as the order of magnitude of tax mitigation is immensely different from the previous cycle to this cycle. Members will propose all sorts of policy fixes to what eastern Montana will perceive as unjust taxation. Some may even try to cap taxes for people living in their homes, which I strongly favor, but these efforts will likely fail.
More likely is that the Legislature may undo the confusing six-year phase-in of valuations. In this cycle, lower tax valuations that homeowners would enjoy may no longer be locked into place until the next decade. Conversely valuation increases wouldn’t have six years to fully phase.
At the center of the property tax debate is a capable Whitefish senator, Bruce Tutvedt, who chairs the upper chamber’s tax committee. Tutvedt favors simpler taxes and may do great things for homeowners. Time will tell.
As most watching their pocket books know, simpler taxes don’t mean lower taxes. Past attempts at income tax simplification translated to lower earners paying more and higher earners paying less. Simple can also mean cutting taxes for out-of-state property owners while ignoring people living in their homes.
Property tax mitigation will again be about local politics as the provincial nature of the Legislature will soon rear its familiar head. Not many enjoy paying taxes, but we cherish our parks, rely upon ambulance services, and want our public schools to do great by our kids.