I’m sure it’s just a coincidence that property tax bills for Montana homeowners are coming out just a few weeks before the election. Coincidence or not, it’s a good reminder for taxpayers to take a closer look at the person who wants their vote.

We don’t need to be reminded that last year’s property tax laws were eye-opening and that this year’s laws will give us similar shock. And that’s despite the generosity of the governor, who is offering a $675 property tax refund for taxes paid in 2022 and another refund this year for 2023, which coincidentally is being offered to us just a few months before the election. There are few coincidences in politics.

The problem with property tax is that it relates to wealth rather than ability to pay. Wealth is what one owns and what has value, but in order to fully enjoy that wealth, it often has to be converted into money, i.e. sold.

Wealth is also measured in livestock, stocks and bonds, and anything else that has value. But the only wealth that is taxed is real estate and other “tangible” property. Since “intangible” property like stocks and bonds is not taxed—in some countries it once was—the rich own trillions of dollars of intangible property that is tax-free except for the income it generates.

In addition, homeowners are taxed based on the full appraised value of their home rather than on their equity in the home, which represents their actual wealth and can be far less than the appraised value.

Just because wealth taxation is not tied to ability to pay does not mean it is right. There is a basic rule of thumb in the financial world that a family’s mortgage payments should not exceed 30% of their income. If they are more than that, it will likely lead to financial hardship. It follows that taxes on a family’s home should not exceed a certain percentage of family income either.

Here’s how Montana’s Senior Homeowner/Renter Tax Credit works. An individual’s maximum property tax liability is calculated as a percentage of family income, and the amount of property tax a family pays above that amount is refunded to the family.

Renters are treated similarly. Like all other pass-through costs, landlords include property tax in the rent schedule. If landlords receive a tax break, they are unlikely to pass it on to tenants, and they should at least be required to inform their tenants of the Renter Tax Credit program offered by the state.

The problem of high property taxes will continue to be with us, as the Legislature has done nothing to address the problem in the 2023 session other than buying time – at a cost of $675 a pop.

Democratic lawmakers have put forward some good proposals. I would venture to predict that they will not be implemented for two reasons: First, they are understandable, and second, they are Democratic proposals in a Republican-controlled administration. They offer a property tax exemption of $50,000 of the value of a home that remains tax-free, and an expanded tax credit for low-income renters.

The Governor’s Property Tax Task Force’s main recommendation is to reduce the tax rate (assessed value x tax rate = taxable value) on residential property to 1.1%, down from 1.35% of assessed value.

On November 17, 2022, a memo from the Montana Department of Revenue stated that lowering the tax rate to 0.94% would keep taxable values ​​at the same level as the previous cycle. However, this possibility was rejected by the legislature. But now, two years later, is lowering the tax rate a good idea?

Sen. Greg Hertz, R-Polson, chairman of the Senate Taxation Committee, is also a member of the task force. Regarding the possible outcome of the next session, he said, “Unfortunately, here in Helena, there are always a lot more lobbyists during the session than there are local taxpayers… I would really encourage local taxpayers to get involved in the legislative session.”

Local taxpayers elect representatives who represent their interests. They shouldn’t have to travel to Helena to deal with lobbyists. That’s what representatives are for.

Montana Viewpoint has been published in weekly and online newspapers across Montana for over 25 years. Jim Elliott was a Montana state legislator and senator for 16 years. He lives on his ranch in Trout Creek.