What really happened with property taxes?

In a recent op-ed piece, former Gov. Brian Schweitzer chastised the current administration and the Legislature for not doing more to alleviate the increase in property taxes paid by homeowners that resulted from the huge increase in residential property values.

He lambasted Montana businesses and employers for having a hand in the residential property tax increase. He also asserted that none of the record revenue the state received went to schools or health care. 

The Revenue Interim committee, composed of six Democrats and six Republicans, was notified in November 2022 that residential and commercial property values were increasing. The committee continued the practice that began in 2015 of not lowering tax rates when new values were implemented. When the state went to a two-year appraisal cycle in 2015, one of the reasons for doing so was to get away from the sticker shock of six- year reappraisals and the subsequent tax rate reductions. Tax rate reductions only fix the value increase for a portion of property owners, leaving other homeowners with significant increases and creating other ongoing problems in the property tax system. 

In my research, no legislator from either party introduced a bill to lower residential property tax rates.

An anomaly also occurred in 2023. While residential property, commercial property and business equipment all had over 30% increases in value, all other major classes of property saw actual decreases in value. This has not happened in recent memory. 

It was the interaction of these two events and the statutorily required decrease in mill levies that caused the decrease in taxes paid by the businesses, who are significant employers and taxpayers, the former governor referenced. Any time a class of property becomes a larger part of the tax base their share of taxes goes up. 

Homeowners’ property values increased by 48%, but their property taxes as a group went up 21%. That increase would have been less had the value of several other classes not decreased.

The administration and the Legislature instead provided two rebates to Montana homeowners to soften the impact of the unusual event. For the majority of Montana homeowners, the rebate exceeded the increase in their property taxes. Mill levies were also reduced by all taxing jurisdictions except the state which also reduced the tax impact of new values.

The state used the historic surplus to do many positive things. They expanded property tax assistance programs. They increased school funding in each year of the 2023 biennium. They provided more money to nursing homes. They filled the states rainy day funds. They provided a rebate to income taxpayers. They simplified the income tax system removing more Montanans from the income tax rolls. They eliminated the business equipment tax for many small and medium sized Montana businesses. They balanced the budget with an adequate surplus to account for an expected economic downturn that has not yet occurred.

Property taxes are, and should be, a concern for all property owners. Montana is the fourth largest state in the nation and has a population of barely over 1 million people. The property tax is the primary source of funding for education, and local services and infrastructure. 

That is a heavy load to bear.

Bob Story is executive director of the Montana Taxpayers Association.