The headline in the Beacon read, “Steady Growth Expected to Continue in the Flathead Valley.” Economists expect steady local growth despite persistent inflation and high interest rates.
High prices, inflation, or interest rates won’t stop newcomers from buying up Montana. Get in line locals, maybe costs ease someday and you can afford a home. Meanwhile, lawmakers seek to reduce top-end state income taxes to lure more migration to Montana.
More growth, higher values equal more state property taxes. That’s how lawmakers rigged the formula. And they aimed tax increases directly at middle-class homes and small business. Big growth in taxes is barreling toward Montanans as lawmakers are mired in the weeds of policy.
I’ve watched long tax hearings in the Capitol and even publicly commented on several bills moving through this legislative process. Earlier in life, I spent years in the Capitol. I’ve learned under which rocks many of the tax details that matter most to locals tend to hide in plain sight.
I’ll walk you through a few details. Apologies upfront, as recent columns have overfocused on this taxing issue. Listening to the lobbyists who prowl the halls of the Capitol, I’m reminded that tax policy is social policy. Middle-class Montana is getting hosed and you should at least know.
The state Department of Revenue reports that statewide taxable values increased by a shocking $1.7 billion due to the 2023 and 2025 state reappraisals of existing farms, homes, and businesses. Shocking because that’s some $127 billion of market value added via reappraisal.
The state levies 101 mills against that $1.7 billion taxable valuation increase. Existing farms, homes, and businesses pay an extra $170 million per year in state property taxes from reappraisal.
The two state reappraisals are estimated by analysts to increase taxes on existing homeowners by $151 million per year, small business $20 million per year, and farms $2 million per year.
On a local level the state revenue department estimates that property taxes on a half million-dollar home will increase $451 per year in the Flathead, $736 in Missoula, and $1,035 in Silver Bow County as a result of the 2023 and 2025 state reappraisals. Double the dollars for double values.
Over the next four years state fiscal analysts predict existing farms, homes and businesses pay $748 million in state property tax increases. That’s the state tax portion on their impact memos.
The Governor’s fiscal note says his relief plan returns $120 million back to some homes and select businesses over that timeframe but requires hiring 23 more full-time state employees to administer the “high influx of applications,” according to the state revenue people at hearings.
Apply and reapply for a portion of your money back is the plan. Never mind the penalties, compliance, or enforcement. I hope you qualify. What a nightmare for grandma.
Pay $750 million in and apply to see if you qualify for a portion of relief from the $122 million back.
State nets a hefty profit of $628 million over four years. Again, according to state fiscal analyst numbers. No local taxes included. The local shift onto homes and off industry will be massive.
What are lawmakers doing with that extra influx of your money? Using it primarily to reduce income taxes that also fund schools. Homeowners balance income tax cuts in the state ledger.
Senate Tax tabled a bill that removed $1 billion of secret exemptions given to big corporations over a dozen years. The corporate welfare keeps home taxes high. None of the exemptions are available to homeowners who get taxed on view sheds, neighboring McMansions, or how Zillow values a house in a neighborhood. Not really, but close enough for government work.
House Tax tabled the bill by Rep. Ed Byrne (R) of Bigfork that said home and business owners pay the same after reappraisal as before. Senate Tax hears a similarly simple concept by Sen. Mary Ann Dunwell (D) of Helena this week, yet also keeps farms from paying more due to revaluation.
Yet the Governor remains hot for his tax bill, which is a red-tape disaster for grandma.
Lawmakers often work to make their bad bills better, as their name is on top of the title page. Gotta fix it, they say. A savvy Governor put a very generic title on their bill, meaning any property tax fix can be amended into the legislation later. Not that we’ll know until months after, it’s still secret.
Maybe the Governor changes his mind – good leaders do, and lets locals just keep their money. No need to prepay to see if you qualify for a portion of relief. Doubtful, I muse. Old-timers are about to pay way more. Apply and reapply. It’s tax disaster of paperwork for the old and rural.
Locally there’s a dramatic consequence to not reducing the multipliers of reappraisal. Lawmakers allow the taxable value of homes to spike to such astronomically high levels in our local school and fire districts that it puts many local safety and school levies in big, big trouble. Lawmakers jacked home tax values beyond reasonable and local voters said, enough already.
Lawmakers will find many worthy ways to spend the $628 million they pocket after a portion of property tax dollars are abated. But that extra $628 million came from farmers, home, and business owners. Lawmakers should be transparent about their eye-popping and taxing plans.
Today, a visiting 7-year-old told me about the “swamp of despair” and how the only way out of a taxing situation was to call for help. Keep it simple, lawmakers. Montana needs you.
There are a lot of dollars leaving local wallets. Lawmakers should use a simpler approach. These state tax increases are big, as lawmakers make simple tax laws complex. Complex enough for a Governor to request 23 more revenue employees to administer the pending red tape.