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Property taxes too high, but special session not the answer

by Dave Fern
| December 20, 2023 1:00 AM

The Montana Freedom Caucus, a group of 21 legislators, has called for a special session. The content of the call asks for a reduction of the 95 mills, clarification of MCA 15-10-420, a mechanism that caps growth on cities and counties, and permanent legislation that would return budget surplus to taxpayers. 

At first glance, the aforementioned appear to be worthy aspirations. However with passage of HB 587, the actions of the past legislature to invest and return surplus dollars, and the recent actions by Governor Gianforte to create a residential property tax task force, the need for immediate action through a special session will likely result in hastily crafted remedies of complicated taxation issues.

HB 587 passed both bodies of the chamber and committees without a negative vote. This popular bill will return taxes collected from the 95 mills to property taxpayers to subsidize the portion of K-12 funding known as the Guaranteed Tax Base (GTB), specifically allocated to fund our school employees' retirement benefits. It’s a good idea as it retains the current contributions of non-residential property taxpayers without a generous discount offered to non-residential taxpayers as specified in the call for a session. To be clear, appraisals have affected tax classifications differently. HB 587 attempts to target reductions for residential taxpayers. 

Here’s why we need to spend surplus dollars. I was fortunate to be selected to serve on The Behavioral Health System for Future Generations Commission. HB 872 set aside $300 million of surplus money to address deficiencies in the state’s services for developmentally disabled and mentally ill Montana citizens. Much of this money, through targeted grants, will re-invigorate our third party providers to reestablish services at the local level. The legislature wisely voted to fully fund Medicaid reimbursement rates for providers, providing potential long-term stability. The legislature returned about half the surplus to property tax and income taxpayers in the state. The remainder of the surplus will provide funding for such diverse needs as workforce housing, roads and school employee health insurance. Though tempting to do so, it would be unwise to tie the hands of the legislature by mandating a refund of all surplus dollars. 

There were attempts to go beyond HB 587 in addressing the impacts of the crazy appraisals assigned to many residential properties. To no avail, I asked for the formation of a select committee, that would have convened during the first half of the session, to make recommendations for future property tax rates. There are more than a dozen tax rates for various property uses. These rates need to work in consort with one another to prevent the disproportional impact of the market demand and resulting irrational appraisals on a high percentage of residential properties. 

There was also an attempt to increase the eligibility of the Elderly Renters and Homeowner Tax Credit. This is a state program that returns tax money to seniors who spend too much of their limited revenues on property taxes. As the middle class is being squeezed to the fringes, we need to consider credits that reach this demographic. I am hopeful that a task force will do a deep dive into varied policies to lower residential property taxes and make recommendations to the next legislature. 

Complicated tax issues require time and robust participation by stakeholders from throughout the state. This special session can not accomplish such demands as envisioned. Perhaps in the future, an annual session schedule would be a remedy. Recognizing the structure we have, it would be better to use the task force, maximize HB 587 and wisely allocate future budget surpluses for a mixed use of demands including taxpayer refunds.

Representative Dave Fern

HD 5, Whitefish

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