County Commissioners propose taxing tourists to help residents with property taxes

Tourists get to enjoy all the amenities of Missoula without having to pay local taxes for them, and Missoula County Commissioner Josh Slotnick told lawmakers Wednesday he thinks they should pay their fair share.

Slotnick listed taxing tourists as one proposed solution the state could consider to help give some relief to residents, who recently saw a median property tax increase of 21%, during a presentation to the Local Government Interim Committee. Other solutions included tying property tax rates to median home prices in a county or shifting the tax burden to other tax classifications, like major industries operating in the state.

The Montana legislature has previously considered a local-option sales tax, as Sen. Mary Ann Dunwell, D-Helena, pointed out in the meeting, but the pressure on both parties to take action on property taxes is rising and may lead to action this time around.

Property taxes have become a major issue for Montana residents this year and a point of contention between counties and the state, each pointing the finger at the other for who’s to blame for the rate increase. Two commissioners with separate party affiliations spoke to legislators as a way to move towards potential solutions.

Commissioner Joe Briggs, a Republican of Cascade County, joined Slotnick to say although the counties deliver your local tax bill, they are largely not responsible for the amount charged.

“I would just hope that everybody remembers that we are acting as an agent of the state in this whole situation,” Briggs said. “Statute defines how we generate the tax bills.”

Slotnick said the current tax system is for a Montana economy that no longer exists, with industrial sectors largely gone and home values rising.

“We have homes that cost a lot, no industrial footprint, and two-and-a-half million tourists that came last year. We have to provide services to those folks,” he said. “So that tax system that was designed from the 1990s, it doesn’t work.”

If local voters support it, Briggs agreed with Slotnick that charging a local option tourist tax could help localities offset the expenses of services rendered to tourists who don’t pay for them. But Briggs said it has to be done in a way that also includes “drive through” counties.

“There’s a lot of counties that are separating Glacier and Yellowstone National Parks, for example, and tourists do drive through and use those roads. They may or may not stop for fuel in any given county, so there’s a sharing issue there,” Briggs said.

Some smaller Montana communities do something similar, voting to establish a “resort district,” to charge taxes in heavily trafficked communities. However, they must be smaller than 5,500 people. These communities include Whitefish, Red Lodge, Virginia City, West Yellowstone, Big Sky, Craig, Cooke City, Gardiner, St. Regis, and Wolf Creek.

Briggs said one solution would be to put a sales tax on select items tourists would likely use and establish an Earned Income Tax Credit to pay residents back.

Slotnick said it could be done through “one to one property tax relief.”

“If we raise a million bucks from tourists, we take a million dollars off of property taxes,” Slotnick said, with a 10% carve out to give to those “drive through” counties.

He said there would be some overlap in a local sales tax, where residents would pay extra at restaurants and bars, but it would still be a “massive net gain.”

“In Missoula County, for locals, at the end of the year you pay less money by having this tourist tax than you would without it in terms of your property taxes,” Slotnick said.

He did concede that there would have to be thoughtful consideration for people who don’t own property.

“We need to figure out a way that if we’re going to credit families, they need to experience that credit the way they experience their economy, which is on a bi-weekly or month-to-month level,” he said.

Another solution Slotnick discussed was to offset the increases to residential properties to other tax bases in the state like industry and big corporations.

“If one classification gets a break, another classification gets added on to. It doesn’t go away. It’s like squeezing a water balloon,” he said. “And right now homeowners and renters are carrying the overwhelming load of this.”

Slotnick said tax increases from residents covered tax deductions in other tax groups, like “centrally assessed” which he said covers pipelines, telecommunication companies, airlines, Northwestern Energy and railroads.

He said Missoula County saw a $50 million decrease from these industries this year, and noted how properties in different classifications saw huge increases and decreases in the same location.

“It’s because you didn’t just pay your taxes. You covered the tax break for other property tax classifications, this system of 16 different classes that are all assessed differently and have a different tax rate,” he said. “This system has gone way out of balance.”

Slotnick said there’s a general confusion around property taxes and that people assume because the bill they received charged them 25% more, that the county received 25% more money, but that’s not the case.

‘We gave our deputies a raise and kept the lights on, and that’s pretty much it,” he said.

He also pointed out that big spending doesn’t always come from local tax dollars, giving the example of federal pandemic response grants Montana counties received.

Another suggestion Slotnick discussed was tying property tax rates to the median home price in a county.

“If your house is worth more than that median home price, then the tax rate would go up,” he said.

Briggs mentioned as he spoke to legislators that him and Slotnick working together was an “Odd Fellows” collaboration — with Briggs being a Republican from Cascade County and Slotnick a Democrat from Missoula.

“A few years ago, if you had told me that Josh and I would be working together on an issue, I might have found that hard to believe,” Briggs said. “But the reality is taxation cannot be partisan.”