Montana’s property tax puzzle isn’t getting any easier

Residential property taxes are on everyone’s minds whether you own or rent your property.  Renters will pay through increases in rents and owners through monthly escrows or direct payments.

The Montana Free Press recently looked at property taxes and reported a total of $1.09 billion in residential taxes last year in Montana.  They also mentioned one other nugget in that of the 100 most expensive properties in the state, all but one are in Madison County, my guess would be Big Sky.

A 20% reduction in residential property taxes would cost more than $200 million a year, with a fair proportion of that tax relief going to mansions in Big Sky.  A political dilemma: Where do you get the money to do an across-the-board tax reduction, and how do you do it in a way not to put most of that money in to high-end home owners pockets?

This gets us closer to our 50-year dilemma of what to do to reduce property taxes?  Sales tax comes always to the top of the list because we do not have one in Montana.  But that gets to the traditional response to a sales tax:  Pay more, what for? 

To give property tax relief to those people who have the big mansions in Big Sky?  That propositions is not going to sell to the voters who must approve it.

The traditional defense is to threaten a citizens initiative if the Legislature were so foolish as to enact a sales tax and the governor to sign it.  More than 100 years ago, Montanans enacted an initiative process to allow the voters to propose and enact laws if they felt the need.  It was the only way that a tax could be enacted on the Anaconda Company whcih had total control of the Legislature.  But the process still exists in the Constitution if the voters need it to protect themselves. A sales tax would ignite an initiative.

So with the sales tax effectively off the table, the ability to do anything meaningful with residential property taxes is a almost a nonstarter.  The money raised with the tax supports schools and local governments whose budgets are set by local taxpayers.  Any reductions in those budgets has to be replaced with state funds to protect local taxpayers.

We have held our tax system together with surges in tax revenue from the energy industry in the 1980s and federal funding surges at various times since.  But now it gets tougher.