Montana Governor Greg Gianforte told the property tax task force he convened in January that they had done a “good job.” He praised parts of the 12-part proposal the task force put forward on Thursday. He said the proposal would provide “innovative tools” that lawmakers can begin using next session to try to reduce the increased tax burden on homeowners.
The 23-member task force has spent the past seven months discussing and drafting options for bills to redirect property tax increases away from single-family homes after lawmakers failed to cut the residential tax rate from 1.35% to 0.94% in 2023 as recommended by the IRS to keep residential tax revenues neutral after assessment amounts rose sharply across the state.
“Montana residents are really counting on us. This report you have produced will serve as guidance and direction for all of us as we go into the next legislative session … to get the job done,” Gianforte told task force members. “I look forward to working with all legislators to collectively implement many of the ideas recommended by the task force.”
The task force’s recommendations will carry weight in the Capitol’s upcoming January session if Gianforte is re-elected and the Republicans retain the majority in both chambers, but they compete with the proposals that the Democrats have already outlined in parliament. In addition, Gianforte’s Democratic opponent presented his first own strategy on property taxes on Thursday in the event that he wins the gubernatorial election.
A survey of Montana residents released Thursday by Middle Fork Strategies found that property taxes, cost of living and housing are among the top issues the governor and legislature should focus on next year and that they are most concerned about.
The Daily Montanan detailed the full package of the task force’s proposals earlier this month, based on the task force’s final report. The report released Thursday contains few changes.
The centerpiece of the bill is a homestead, agstead and comstead tax exemption, which the task force says would reduce taxes by at least 15 percent for about 345,000 homeowners and long-term renters, as well as about 32,000 business owners. “Agstead” refers to agricultural land and “comstead” to commercial real estate.
The property tax exemption would reduce the tax rate for primary residences and long-term rental properties valued at just over $1 million from the current 1.35 percent to 1.1 percent. Homes valued above that, as well as short-term rental properties and second or follow-on homes, would be taxed at 1.9 percent.
Commercial properties up to six times the median value, or about $2 million, would be taxed at a rate of 1.5 percent under the proposals, while properties with a higher value would be taxed at 2.1 percent. But even properties worth $10 million would see a minimal tax increase.
“Bill Gates, Tom Brady, Justin Timberlake – there’s a whole list of them that are here. We’re glad they’re here, but they don’t participate in the income tax but they benefit from these benefits,” Republican Rep. Llew Jones of Conrad said in an interview. “So this model at least brings them to the negotiating table to help them pay.”
Gianforte particularly liked the property tax exemption.
“I, for one, feel strongly that we should move forward with a property tax exemption to give Montana residents priority for primary residence. That will provide good, long-term relief,” Gianforte said. “It will also ensure that out-of-state residents who don’t live here, don’t pay income tax here, and own second homes here pay their fair share — not just for our schools, but for law enforcement, roads and bridges, emergency response — and I’m glad the task force included that in one of the recommendations.”
He added that additional proposals from the task force’s other two subcommittees, which focused on education and local government, “outlined additional tools we have in our toolbox.”
Republican Rep. David Bedey of Hamilton outlined the Education subcommittee’s proposal to convert the school district-based levy into a statewide levy, which he said would narrow the range of tax rates levied in counties across the state and reduce tax rates levied in seven of Montana’s 10 counties.
Senator Greg Hertz (R-Polson) discussed the Subcommittee on Local Government’s proposal to change the language on the tax levy ballot to use dollar amounts instead of tax rates so that the amount collected by levying the tax does not change as property values increase.
“It basically allows them to focus on how much money they need for a project. They can continue to grow above inflation, but it’s not going to give them a huge windfall. And property taxes remain more stable for voters and taxpayers across the state,” Hertz said.
In an interview after the meeting, he said he thought the task force’s property tax exemption was a better version of the solution proposed by Democrats. He believes some proposals to eliminate the levies and impose a higher approval threshold for approved levies would still allow taxpayers to “make the right decisions,” and that there will be plenty of back-and-forth between competing interests when the bills come to a vote early next year.
“Unfortunately, here in Helena, there are always a lot more lobbyists than local taxpayers during the legislative session, so we always have to focus on the best decision. But I would really encourage local taxpayers to get involved in the legislative session,” Hertz said.
Gianforte said the report was full of “innovative ideas” and he was “sure we will implement them.” He praised the task force and also mentioned that the second round of homeownership rebates is now open for applications.
“I am confident that the task force’s work has produced concrete and specific strategies to combat rising property taxes. I want to thank everyone for their work,” Gianforte said. “This is truly a job well done. Each member has shown their commitment to stopping the rise in property taxes, especially for Montana residents and their primary residence.”
Busse wants to reduce residential property interest rates from 1.35% to 0.94%
About two hours later, Gianforte’s Democratic opponent in November, Ryan Busse, unveiled a first step of his plan to combat property tax increases and housing affordability issues.
That original plan only calls for a general reduction in the residential tax rate to 0.94%, as the IRS recommended at the end of 2022, but which lawmakers led by a two-thirds Republican majority did not do.
“The previous four governors of Montana have faced similar situations and, in my opinion, have responded very responsibly and implemented the core principles of our tax plan, which is to lower the tax rate so that homeowners are not burdened with increased tax rates or tax bills and big industry does not receive de facto major tax breaks,” Busse said in a digital press conference alongside his running mate Raph Graybill and former Governor Brian Schweitzer.
Schweitzer said he believes the Gianforte administration and the Republican Legislature did not intentionally lower the tax rate to raise another $200 million while giving tax breaks to big corporations. And while he said the task force came up with some “good ideas,” lowering the tax rate was the easiest and quickest solution that could have been achieved without ever convening one.
When asked what else he and Graybill were working on to address Montana’s housing crisis, the two said they were working on proposals but did not have a concrete list ready because they wanted to focus on the task force announcement.
“So I think in the long term we’re open to having conversations about billionaires with a fourth home like Gianforte paying their fair share. I think we’re open to having conversations about the property tax exemption and other ways to make the tax burden more equitable for the people who live in Montana and call it home,” Graybill said. “But the first thing we need to do is correct that initial decision, which his new plan still doesn’t provide for.”
House Democrats also introduced a $230 million package of property tax proposals in July that includes a Homestead-Comstead tax exemption for low- and moderate-value homes and businesses, a graduated tax rate that favors low-value properties and a housing equity tax credit that could also be extended to renters. They say this would shift more of the tax burden to wealthier homeowners and large businesses and provide more long-term relief for average Montanans.
“Our plan lowers costs for Montana workers, families and retirees so they have the freedom to stay in their own homes,” Senate Minority Leader Pat Flowers of Belgrade and Rep. Jonathan Karlen of Missoula said in a statement Thursday. “Someone living in a middle-class home should not pay the same tax rate as someone living in a mansion.”
This story was originally published by The Daily Montanan, a nonprofit news organization and part of the States Newsroom network. Read more at www.dailymontanan.com.
