Analysis of property tax reform bill
Amid heated debate over the state Legislature’s work on property taxes, I’d like to chime in with a simple cost-benefit analysis.
According to the Governor’s Office and proponents, the benefits of Senate Bill 542 and House Bill 231 are that 80% of Montana primary residences received a tax reduction, saving an average of about $500 per year.
Neutral impacts were the 10% of homeowners who didn’t see much change to their tax bill.
An unclear aspect is long-term rentals. These bills cut their tax rates but didn’t mandate the savings reduce rents. Also, a mistake led to an immediate, large tax increase on many apartment complexes, which both Republicans and Democrats agree will increase rents.
The well-known costs of the bills include: 10% of primary residences who saw their taxes go up, huge tax increases on family cabins and other non-primary residences, and tax increases on other types of property like businesses.
Total property tax collections statewide actually increased by $127 million, according to the Frontier Institute.
Another well-known cost is the legislation’s negative impact on charter cities like Billings.
A cost that even many legislators are not aware of is the impact the two bills are having on entities such as school districts, fire districts and state government finances. For example, according to the chief in my fire district, it will lose 15-20% of its revenue. The district has a permissive levy that they can utilize should they choose, but that will mean local property taxes in the fire district will go up. Also, my school district will lose approximately $477,000. The school administration said the district’s homeowners may be getting an additional tax bill adding approximately $100-$110 eating into that $500 average savings mentioned earlier.
According to the Legislative Fiscal Division, SB 542 and HB 231 are costing the state’s general fund $101 million in fiscal year 2026 and $97 million in fiscal year 2027 (excluding the one-time-only rebates). The bulk of those costs come from backfilling school finances.
Maybe SB 90 wasn’t the answer, but its premise is informative. In its original form, it would have spent $102.5 million of state revenue to reduce every Montana primary residence’s tax bill by $437 year after year, with no tax shift or other complicated factors. If the lawsuit against SB 542 is successful, or if we want to try a different approach regardless, here’s how the math seems to shake out:
It takes about $117.5 million to give 100% of primary residences $500 each in tax relief, the same amount of average relief that SB 542 and HB 231 gave to 80% of homeowners. Simply repealing the bills and allocating the amount saved from the general fund covers about $100 million of that. A simpler, less drastic rebalancing of tax rates could help close the remaining gap.
Unfortunately, when HB 231 and SB 542 were being pushed last session, I heard from several legislators that “we have a mandate to pass some type of property tax relief.”
Many legislators were willing to blindly vote for bills without understanding the impacts of each. The disingenuous process I witnessed last session is why citizens get bad legislation. There are some short-term benefits to these bills, but ignoring the long-term negative impacts does not serve the citizens of Montana well.
We need to continue to look at alternatives to give homeowners true tax relief. The cost of taking an SB 90-type approach is less expensive than I think most people realize, and it would eliminate all or most of the bad tax shift impacts of SB 542 and HB 231. That’s an awful lot of harm reduction for a relatively small financial cost to the state beyond what we’re already spending.
Montana, we can do better.
Rep. Mike Vinton, R-Billings.