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Gianforte tells property tax task force to find solutions without imposing sales tax

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Gianforte tells property tax task force to find solutions without imposing sales tax

Feb 14, 2024 | 6:33 pm ET
By Blair Miller
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Gianforte tells property tax task force to find solutions without imposing sales tax
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Gov. Greg Gianforte addresses the first meeting of his newly created property tax task force on Feb. 14, 2024. (Photo by Blair Miller, Daily Montanan)

As Montana Gov. Greg Gianforte’s new property tax task force held its first meeting Wednesday to set a path forward on how to address increasing residential property taxes, the governor made clear from the outset that implementing a general statewide sales tax should be completely off the table.

“We must ensure Montanans who are struggling to make ends meet are not at risk of losing their home because of higher property taxes and we must do all this without imposing a statewide sales tax. Period,” Gianforte told the 23 members of the task force in the meeting room of the governor’s office in Helena.

For years, the idea of imposing a statewide sales tax in Montana in order to increase state revenue and offset other taxes has been floated by various lawmakers and groups, but has also been seen as a last-ditch move so the government doesn’t have to add another tax on to residents. Montana is one of five states with no statewide sales tax, though the constitution allows for one of up to 4%.

The governor putting his foot down on the issue doesn’t mean there won’t be discussions about a statewide sales tax during the next several months as the task force and its three subcommittees look into ways to restructure the tax code and where to shift burdens away from homeowners. Several members said whether it’s now or in the near future, the state is likely to have to figure out a new source of revenue in order to keep various tax burdens low for residents while also funding governments at the local and state levels. Currently, about 85% of residential property taxes fund local government services, while the rest goes to the state to pay for public schools.

“Without an additional source of revenue somewhere, all we’re doing is squeezing them, right. If we say we’re squeezing the balloon here and reducing the burden on the residential taxpayer, that guy’s storefront on Main Street in Conrad gets it, or somebody’s farm gets it, or the refinery in Billings. You name it,” said Montana Department of Revenue Director Brendan Beatty. “So, without another source of revenue … what are we doing, right? Because if you even saved some homeowners money, somebody else is picking up that ticket.”

Gov. Greg Gianforte speaks to the property tax task force on what he wants to see in a report later this year. (Photo by Blair Miller, Daily Montanan)
Gov. Greg Gianforte speaks to the property tax task force on what he wants to see in a report later this year. (Photo by Blair Miller, Daily Montanan)

Gianforte created the task force through an executive order last month in the face of widespread outcry from homeowners across Montana, as well as most of the state’s county commissions, about why the Republican-supermajority Legislature failed to decrease tax rates for residential properties last year, as the DOR suggested ahead of the 2023 session, which led to an average reappraisal increase of more than 40% statewide and a median property tax increase of 21%.

Gianforte’s administration is allowing homeowners to claim $675 property tax rebates for last year and this year, but those unhappy with the tax increases say the rebates don’t mean much since they are only for two years.

But Republicans and the administration have lauded the passage of House Bill 587 as a permanent relief measure, which created a new account for some local tax levies that proponents say will allow districts to levy lower local taxes on property owners moving forward.

All but seven counties in the state tried to reduce the number of mills levied to funding public schools in Montana to 77.9 mills in order to alleviate some of the increase for local homeowners, but the Supreme Court overruled that effort and decided unanimously that counties have to levy the full 95 mills.

And multiple efforts from both legislative Democrats and Republicans to call for a special session to address the issue were rebuffed, leading to the task force, which will have to prepare a report by August to deliver to the governor and Legislature that will shape legislation on taxes in the 2025 session.

Gianforte outlined what he hoped he would hear from the task force this summer in terms of recommendations. Those include stopping the growth rate of property taxes, increasing transparency of tax bills and budgeting processes, increasing voter participation for mill levy ballot measures, fully funding education, and ensuring fixed- and low-income Montanans are not priced out of their homes because of increasing property taxes.

Gianforte’s budget director, Ryan Osmundson, is the chairman of the task force, which is made up of Republican and Democratic legislators, some county and city elected officials, state agency employees, think tanks, lobbying organizations, researchers and economists.

He, Gianforte and members of the task force acknowledged the complexity that trying to solve such an issue brings because of the offsetting burdens, differences between rural and urban Montana in terms of needs and voting habits, and widespread ideologies about economics and taxes in general.

“I want to be frank; this is no small task. Property taxes are very complex, and we’re not going to kick the can down the road again, though. We need to solve it. We need to deal with these important pressing issues that all Montanans face,” Gianforte told the task force.

The remainder of the two-hour meeting mostly involved task force members throwing out ideas for what paths the three subcommittees — focused on education, local government, and tax fairness and equity — can start down to try and come up with solutions. The task force as a whole is expected to meet once a month and is discussing potentially taking the meetings on the road to other parts of Montana.

The discussions ranged from addressing Montana’s population growth, how wealthier people moving here from out of state have affected the housing market, to possible changes to the statute that governs how mill levy rates are calculated, to possible tourist taxes and shifting more of the property tax burden to out-of-staters who own vacation homes in Montana but contribute little to the state’s income tax.

The group said they wanted to have a discussion on the constitution and what it would permit under the equal protection clause in terms of taxing different groups at different rates, how to deal with higher local budgets that come from voter-approved tax increases, perhaps sunsetting some levies, how to help renters who have seen increased costs with no reimbursements, and figure out the overlap between who votes in special bond and mill levy elections and the full community’s thoughts on the effect of those increases.

Rep. David Bedey, R-Hamilton, will lead the education subcommittee for the task force; Sen. Greg Hertz, R-Polson, will lead the local government subcommittee; and Rep. Llew Jones, R-Conrad, will lead the tax fairness and equity subcommittee.

Osmundson said the subcommittees will work with the Department of Revenue to gain data and insight they will use to put together policy recommendations that the task force will compile into the final report.

“I’m optimistic about what this group is going to accomplish as you work to identify the underlying problems and provide solutions for long-term property tax reform,” he told the task force.