There Is No “Simple” Solution To Property Taxes

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State Senator Greg Hertz Thursday, December 5th, 2024   1:13pm  

In recent opinion pieces, Evan Barrett, a longtime Democratic consultant, and Mike Jopek, a former Democratic legislator, have repeatedly provided their “simple solution” to our high property taxes in Montana: just lower the residential property tax rate to 0.76%. If it truly was that simple, both Democrat and Republican legislators would have already done it. The reason it hasn’t happened is because it wouldn’t work like Barrett, Jopek, and others claim.

Property tax rates don’t work like income taxes or sales taxes. If you have a 25% income tax rate and you make an additional $10,000 of income, your additional income taxes would be $2,500. Simple. And you get similar results in a sales tax.

Property taxes don’t work like that at all. If you own a $300,000 home and your tax rate is 1.35% (the current rate), your taxes are not $4,050 ($300,000 X 1.35%). Changing the rate to 0.76% would also not lower your taxes by $1,770 as you’d expect. That’s because your actual property taxes owed are calculated using many more factors than just the tax rate.

It starts when schools, cities, and counties set their budgets. Then they calculate how much property tax revenue they need to meet those budgets. The formula used to make that calculation includes not just the different tax rates of residential, commercial, agricultural, and other property types, but also total property values of all those types of property within the jurisdiction issuing the taxes. Those numbers differ wildly depending on which part of the state you’re in.

For example, Lake County has 87% residential property, Flathead 78%, and Silver Bow 46%. Changing a tax rate will impact each county and taxpayer differently depending on types of property in each county. Also, lowering one rate (residential) doesn’t cut the taxes local governments receive, but merely shifts the tax burden to other types of property. If all you did was lower the residential property tax rate in a place like Lake County, you’d be shifting (raising) the property taxes on local small businesses enough to put many of them out of business.

To further illustrate these differences, let’s look at Barrett’s, Jopek’s and my taxes.

According to public records, from 2022 to 2023 Barrett’s taxes (Silver Bow) increased by 25% and his appraised value increased by 75%. Jopek’s taxes (Flathead) decreased—yes, decreased—by 3% even while his appraised value increased by 38%. My taxes (Lake) increased by 34% with an appraised value increase of 49%. We all have the same tax rate of 1.35% on our homes yet our taxes changed in very different ways because of different property types in our counties and different budgetary decisions made by our respective local governments.

Property taxes truly are controlled at the local level, not at the state level. That’s why taxes on homes of the same value are much higher or lower depending on the county or city you live in.

The 2025 Legislature will be working on various proposals to reduce property taxes. Our focus will be on Montana full-time residents along with providing taxpayers more control and oversight over future tax increases. However, if your individual taxes decrease, that means another taxpayer’s taxes will increase—unless school, city and county budgets are decreased, or another source of revenue is used to reduce property taxes.

The calculation of property taxes is not simple. Longtime political and government operatives like Barrett and Jopek should know better than misleading the public with a simple “solution” that, if it were implemented, would devastate people like farmers and ranchers or small businesses.

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Sen. Greg Hertz, R-Polson, is the Chair of the Senate Tax Committee in the 2025 Legislature.