Uncommon Ground

Unfinished Business

Ignoring the revenue departments warnings on a historic reappraisal permanently cost homeowners

By Mike Jopek

An old-timer at the state capitol looked me square in the eyes and told me to remember who I worked for. He said the only people unrepresented by lobbyists during legislative sessions were local residents, the homeowners.

He cautioned me and other young lawmakers that we’d get fed steak and booze by big-money lobbyists, working the halls of power, on behalf of the powerful corporate interest they were paid to represent.

I heeded the elder’s knowledge. Many colleagues did the same. My politics was mentored by compromise, having served in two of Montana’s evenly split House chambers, where each party enjoyed equal number of members.

Ignoring homeowner property tax reappraisals was one of the last Legislature’s biggest mistakes. It remains unfinished business, needing a simple fix to avoid historic state tax increases.

It took a supermajority, one-party control, to ignore the largest class of taxpayers, the resident citizens, the local homeowners. The writing was all over the capitol. The warnings were issued by the Department of Revenue.

The revenue department recently released another startling memo that estimates property taxes paid by homeowners and anticipated tax growth by county between tax years 2022 and 2023.

Homeowner property taxes in Montana are expected to increase by nearly $197 million this year. $1 billion over the next five years. A shocking amount. More money than available in the rebate program, according to the Legislative Fiscal Division, though not every homeowner qualifies.

The revenue department memo estimates that the taxes Montana residential property owners statewide pay increases 18% this year. The main culprit being the Legislature’s unmitigated state reappraisal which raised home values by a staggering $60 billion.

This year, homeowners in rural Montana are predicted to experience a notably higher rate of property tax growth than many urban areas, the revenue department memo indicates. Homeowner property taxes in counties like Chouteau grow by 28%, Judith Basin 35%, 26% in Pondera, and an eye-popping 36% in Deer Lodge.

This reappraisal hits rural Montana homeowners hard. The Legislature is taxing old farmhouses a lot more after reappraisal. At 16%, Flathead residential property tax growth is below the state average, yet $22 million more than last year or $100 million over five years.

The supermajority ignored an earlier revenue department memo outlining how lawmakers need adjust three tax rate numbers to stop a massive homeowner tax increase. A tried-and-true fix every Legislature in Montana over the past 40 years used with significant reappraisals.

Before reappraisal homeowners statewide were responsible for 52% of local tax bases. After reappraisal the homeowner share of local tax bases jumps to 57%. With total property taxes estimated at $2.25 billion, a 5% larger share for homeowners, the workers and retirees is enormous.

The Legislature shifted $50 million of tax base from big commercial and onto residential property owners. Such tax shifting hasn’t cursed Montana since deregulation days. The big winners, then much like today, remain big industry paying less as homeowners pay more.

The supermajority wouldn’t change three tax rates associated with reappraisal and caused the vast bulk of the estimated $197 million homeowner property tax increase. The state portion levies $81 million more property taxes onto homeowners than last year, the Legislature shifted $50 million from local tax bases onto homeowners and off big corporations.

The smaller increases may come from new homes locally, voter levies, and a 2.5% cap imposed on local governments across Montana. Two thirds of the homeowner property tax increases results from unfinished business in the Montana Legislature. Ignoring the revenue departments warnings on a historic reappraisal permanently cost homeowners.

State lawmakers aren’t being square with Montanans. They enjoyed a $2.5 billion budget surplus, boasted about it nonstop, yet helped saddle homeowners with a permanent $197 million tax increase, every year.