A well-known Republican legislator has introduced a set of bills aimed at reducing property taxes in Montana. These bills propose conducting revotes on certain local tax levies in order to lower the tax burden, while also increasing the approval margins necessary to pass levies and bond measures in local elections with low voter turnout.
Senate Taxation Committee Chair Sen. Greg Hertz, R-Polson, said at a Wednesday hearing before his committee that he believes rising property taxes are the “No. 1 concern” for many Montana residents and voters.
Hertz expressed his concern that the growing discontent with increasing property taxes may lead to the introduction of a statewide constitutional amendment akin to California’s Proposition 13 in the future. In order to address this issue, he proposed that legislators explore the possibility of implementing a statewide sales tax. His intention was to initiate a dialogue on the funding of local services.
Hertz mentioned that there is room for improvement in the efficiency of budgets for cities, counties, and schools. He pointed out that property taxes, which are approved by voters, contribute to this aspect.
Hertz’s bills would limit some tax levies to five years without reapproval (Senate Bill 125), require new votes for some levies that are currently permanent (Senate Bill 251), and make it harder to authorize new bonds (Senate Bill 291) and mill levies (Senate Bill 292).
In local elections with voter turnout below 40%, property tax increases would only be authorized if a supermajority vote is achieved. For increases to pass in elections with 30% to 40% turnout, at least sixty percent of voters would need to vote yes, and proposals would automatically fail if turnout is 30% or less.
SB 251, the bill that mandates new votes for currently permanent levies, would not apply to bond levies and essential taxes that fund vital services like schools, law enforcement, fire departments, water and sewer lines, search and rescue operations, and garbage collection. However, in response to criticism from the bill’s opponents, Hertz announced his intention to amend it to also exempt libraries, hospitals, and nursing homes.
Hertz stated that there is a growing fatigue among people regarding levies, and he believes it is important to give citizens the opportunity to review their past approvals and determine if those align with their current top priorities.
“People are experiencing fatigue from levies, and I believe it’s important to give citizens the opportunity to revisit the past approvals and reassess whether those align with their current top priorities.”
Sen. Greg Hertz, R-Polson
During Wednesday’s hearing, opponents of SB 251 expressed concerns about the potential consequences of the bill. They argued that if passed, reauthorization votes for taxes currently funding parks, bus systems, weed control districts, senior centers, and local mental health services would introduce an element of uncertainty. They feared that reducing funding for mental health or homelessness services might force individuals to rely on remaining services such as libraries. Additionally, they raised apprehensions regarding the overcrowding of ballots with reauthorization votes and the resulting funding uncertainty, which could pose challenges in retaining staff in levy-funded positions.
“The Montana Federation of Public Employees’ executive director, Erik Burke, questions why local voters should not be granted the opportunity to have a permanent levy if they desire to financially support a parks department or a county fairgrounds operation, especially when they have already constructed a park facility and aim to sustain and manage it.”
In part because Montana doesn’t have general purpose sales taxes outside of a few resort communities, cities, counties and schools across the state are heavily reliant on property taxes to pay their bills. A legislative study published last year found that property taxes make up 97% of local government revenues in Montana, compared to a 72% average nationally. (While Montana also collects state income taxes, that money is generally used to fund programs at the state level.)
According to the Montana Department of Revenue, tax collections on residential land and buildings in Montana totaled $1.1 billion in 2022, a 70% increase over 2012. The department has also said it expects the assessed value estimates used as part of the residential property tax formula to rise by 43% on average in the 2023 reappraisal cycle.
Those increases have made property taxes an increasingly hot-button issue in Montana politics, with both Republican and Democratic lawmakers saying they hear from constituents who are afraid rising property taxes will push them out of their longtime homes. A property tax-capping constitutional initiative modeled on California’s much-debated Proposition 13, CI-121, failed to collect enough signatures to make the Montana ballot last year amid opposition from labor unions and business groups, but legislators of both parties have said they expect anti-tax advocates to push similar initiatives in the coming years.
Legislative Democrats have pushed to address rising property taxes by creating programs that offer income tax credits to offset property tax bills for middle- and low-income residents, but those efforts run up against opposition from majority party Republicans who are skeptical about using state tax dollars to address what they consider a problem rooted in local government spending. A Democratic bill, House Bill 280, that would have created a long-term property relief tax credit was voted down after debate on the House floor this week.
Some Republicans, Hertz among them, have also suggested that lawmakers should consider a statewide sales tax. Though that idea has been long-hated by the Montana public, it would let the state add a third major support to its public finance system — one that would collect revenue directly from the millions of tourists who pass through the state each year.
During the discussion of his bills on Wednesday, Hertz, along with other speakers, proposed that Montana should contemplate the adoption of a sales tax as the Senate Taxation Committee deliberated.
“We currently rely on a two-legged stool,” he explained. “Our main sources of revenue are income and property taxes, which disproportionately burden property owners at the local level. Until the people of Montana are open to exploring alternative forms of taxation, this is the situation we find ourselves in.”
