On Wednesday, House Republicans rejected a bill proposed by Democrats that aimed to alleviate the burden faced by lower-income homeowners and renters due to increasing property taxes. The bill suggested utilizing income tax credits for this purpose.
House Bill 280, sponsored by Rep. Jonathan Karlen, D-Missoula, aimed to offer a state income tax credit to homeowners making up to $130,000 a year to reimburse them for a portion of their property tax bill. It would also have let renters claim a credit for a portion of their rental bill assumed to be attributed to property tax.
Karlen stated that the tax cut is essential for providing substantial and enduring property tax relief, which is necessary for working and retired individuals across all communities in Montana.
A fiscal analysis by the governor’s budget office estimates the bill would have provided aid to 87,000 households and cost the state General Fund about $82 million a year, producing an average credit of approximately $940 a household. In comparison, a long-term tax cut focused on income taxes rather than property taxes, which is moving through the Legislature with the backing of Gov. Greg Gianforte, would cost the General Fund about $170 million a year.
The bill proposed by Karlen, which barely made it through the House Taxation Committee with an 11-10 vote on Feb. 7, was rejected on the House floor on Wednesday by a vote of 38-62. Interestingly, all but six of the House’s 68 Republicans were against it.
House Republicans previously forwarded a billion-dollar-plus spending package that includes short-term property tax rebates of up to $500 a year for 2022 and 2023, but lawmakers of both parties have said they believe the state needs to look at ways to address property taxes on a long-term basis. Democrats have also voiced concern that the rebate package doesn’t include direct property tax relief for renters.
Rep. Dave Fern, D-Whitefish, said during Wednesday’s floor debate that he believes the Legislature needs to take action to head off a Proposition 13-style tax revolt. That measure, passed by California voters in 1978, placed strict limits on how fast property taxes could grow, triggering decades of turmoil for public budgets. A Montana initiative modeled on Prop 13 failed to qualify for the Montana ballot last year after a coalition of industry and labor groups from across the state’s political spectrum spent hundreds of thousands of dollars lobbying against it.
According to the Montana Department of Revenue, tax collections on residential land and property in Montana in 2022 totaled $1.1 billion, a 70% increase over 2012. The department has also said it expects the assessed value estimates used to calculate residential property taxes to rise by 43% in 2023.
On Wednesday, Fern stated that if the sponsor’s proposition is unsatisfactory, it is essential to devise a superior proposal. However, she emphasized the importance of addressing property taxes on a statewide level.
However, numerous Republicans have attributed the increase in property taxes to what they perceive as unnecessary expenditures by cities, counties, and school districts. On Wednesday, a few GOP legislators expressed their reluctance to allocate state resources towards resolving what they view as a concern rooted in local government spending.
“I think we have better ways to attack this issue than by throwing budget money at it,” said Rep. Terry Falk, R-Kalispell.
“The state did not create the property tax problem, and it’s not our job to fix the property tax problem,” said Rep. Jennifer Carlson, R-Manhattan.
Noting that a majority of property taxes go to schools and that many property tax levies are approved in local elections, Carlson also said she worries that subsidizing the local property tax burden would give local governments leeway to grow their budgets.
According to Carlson, the responsibility lies with the voters to refrain from voting for things they are unwilling to finance.
Karlen argued that a significant portion of property taxes are allocated towards well-received local initiatives.
He stated that in Montana, local governments primarily rely on property tax for their income. If we are not reducing funding for the police, fire department, or other vital services, then at the state level, we should prioritize preventing seniors from being unable to afford their homes.
