Kathleen Kimble, a Missoula resident who has seen significant increases to her property taxes, expected her retirement in to be full of local concerts and comfort with her husband in the house they've shared since 1992. Kimble and her husband are both on fixed incomes, but their property tax bill from went from $3,198 in 2018 to $4,934 in 2023.
Randy Kadish, who has lived in a condo in Missoula for the past 8 years and is on a fixed income, saw his condo reappraisal go from $131,000 to $244,000 and his tax bill increased by 300% in the past year.
The Missoula County Clerk and Treasurer, Tyler Gernant, has been very critical of the state in allowing the property taxes to spike.
“This was an opportunity for the state to take a leadership role in reducing the cost of homeownership, and they chose to go a different route,” said Gernant.
In November 2022, the department of revenue saw that Montana property reappraisals increased 40-60% in the past two years. The department warned state legislators ahead of their 2023 session that Montana property taxes were going to skyrocket, advising them to lower the state's mill rate in order for property taxes to stay the same. The government levied property taxes at the maximum 95 mill rate instead of 77.89 mill rate, the rate for which the state counties advocated for that would keep property taxes from spiking.
According to Schweitzer, this raise in property taxes is also coming at a time when the government has an $800 million-dollar surplus.
“As the governor has said repeatedly, most local governments, including counties, are good stewards of taxpayer resources, live within their means, and exercise restraint with property tax increases. Some, however, are spending out of control, continue to fund their largesse with skyrocketing property taxes, and unreasonably put that heavy burden on the backs of Montana homeowners. The governor and legislators in 2021 and 2023 enacted fiscally responsible, conservative budgets that have held the line on new spending, permanently cut Montanans’ taxes, and provided Montanans with up to almost $4,000 in tax rebates. The counties that are spending and taxing at alarming rates should take that page out of the governor’s playbook and rein in their spending and taxes.”
However, according to Gernant and Schweitzer, local government can only raise taxes on its residents by half the rate of inflation from the past three years, far less than the amount property taxes were raised on homeowners.
Centrally assessed electric and telephone utilities where among a handful of tax classes awarded decreases from the 2021 Montana Legislature. Taxes are passed through to utility customers.
NorthWestern tells rate analysts for the Montana Public Service Commission that the lower tax rate translates into a $6.95 difference in utility bills for customers using 750 kilowatt hours of electricity monthly.
The company indicates that later it will attempt to pass on to customers $1.81 million in taxes owed on its new gas-fired power plant near Laurel.
Several adjustments have affected customer bills since October when the Montana PSC approved a 28% base rate increase for NorthWestern Energy customers.
NorthWestern suggests that its current rate for electric customers is about 18% higher than what customers paid in August 2022 when its general rate case began.
Billings Gazette: Tax cut shows up on Montana utility customer bills
The Flathead County Board of Commissioners on Jan. 24 voted unanimously to amend the amount collected of a statewide school equalization tax for the 2023 fiscal year, returning the amount the county collects to the annual standard of 95 mills.
The commissioners in October voted to reduce the tax amount to 77.9 mills after an unprecedented spike in property values drove an increase in taxes. The county was forced to reverse course and collect the full 95 mills following a November Montana Supreme Court ruling stating that Montana’s 56 counties must collect the full tax amount per a directive by the state.
After an influx of new residents flocked to Montana during the pandemic, fundamentally reshaping its housing market, the median residential property value in the state rose by 46% between 2021 and 2023. The median residential property value increased by 45% in Flathead County; 54% in Glacier County; 59% in Lincoln County; and 44% in Lake County.
Due to the statewide spike in property values, the state’s school equalization levy, which distributes educational funds between tax base-rich and tax base-poor school districts, is set to bring in an additional $99 million in revenue for the 2024 fiscal year.
Citing concerns over rising tax bills, 49 of Montana’s 56 counties this fall collected 77.9 mills, rejecting an order from the Department of Revenue and the Gov. Greg Gianforte administration to collect 95 mills in spite of rising property values.
“Flathead County is not raising property taxes. Residents will pay the amount originally due under 95 mills, with the balance being added to the second payment due in May,” the press release stated.
Flathead Beacon: County to Collect Supplemental Property Taxes Following Court Ruling on 95 Mills
Tuesday morning, a handful of county treasurers presented to the state’s Revenue Committee, and they came prepared with a litany of complaints, and even fears for their safety.
“We get calls every day, how are we going to pay our taxes? Our heart just goes out to these people, and what do you do? And we work with them as much as we possibly can,” said Ravalli County treasurer Dan Whitesitt.
There was also plenty of discussion about the recently finished court case on school equalization mills, with dozens of counties now having to send out new bills to make up the difference after contesting the state’s interpretation.
Solutions floated in the hearing include phasing in impacts to increases in market value on property taxes, potentially moving back to a six-year appraisal cycle rather than the current two years. Possibly, creating a permanent homestead exemption, changing computer programs used to keep track of taxes, and lowering the residential tax rate.
“As residential property values shot through the roof over the last two cycles businesses and industrial and other types of property ended up paying less as a share of taxes,” said Gernant.
NBC Montana: County treasurers tell legislature property tax system needs reform
Among several changes to Montana’s income tax system that took effect at the beginning of the year is a provision that makes income from tips subject to state taxes.
The shift aligns Montana with the federal tax system, in which tips have long been taxed alongside salaries and wages. It also means that many service-sector workers will likely have their state income tax obligation increased by hundreds of dollars a year.
Montana’s top-bracket tax rate, which now applies to annual taxable incomes over $20,500, is 5.9%. That means that many service sector workers will owe an additional $5.90 in state taxes for every $100 of tip income they report on their tax filings.
“It’s just not fair — it makes no sense for these individuals to not have to pay their fair share of taxes on just a particular type of income that they get,” [Sen. Greg Hertz, R-Polson] said.
Democrats pushed to keep the exemption, saying it is unfair to increase taxes on workers who are in many cases scraping to get by.
“We’re talking about our lowest-income Montanans here,” said then-Senate Minority Leader Jill Cohenour, D-East Helena.
Montana Free Press: Do you earn tips? Montana now taxes them.
Last year, the city, county, Transit District, and Missoula Public Schools levied a total of $195 million. This year those same entities are scheduled to levy $209 million. This is an increase of about 7%.
This is no small number and local taxing authorities need to take it seriously. However, considering the recent high inflation, population growth, significant problems created by homelessness and the related very high housing and rental costs, 7% does not seem particularly out of control and it certainly doesn’t explain why the median value home in Missoula saw an increase in taxes of over $1300 or 23%.
Our property tax system starts with the market value of a property, which is multiplied by the tax rate for that type of property (1.35% for residential housing). The result is multiplied by the number of mills, levied by each of the tax jurisdictions that the property is in, divided by 1000.
Property tax levies are either set at a statutorily established number of mills, like the 95 mills for state school equalization or are limited to a dollar amount which is translated into mills. Schools are limited by state formulas that include many factors, with the most significant being the number of students and inflation. Local governments are primarily, but not exclusively capped by their previous year’s property tax revenues with a limited inflation adjustment and the addition of newly constructed property.
Because schools and local governments are capped by a dollar-based formula, when the tax base grows faster than their budgets the number of mills levied must be reduced. That is the case this year where the millage (depending on which jurisdictions you live in) was reduced from about 900 mills to 780 mills. A 12% reduction.
Thus, properties that did not have a significant increase in value saw an actual reduction in taxes.
This last point is illustrated by the fact that 5 of the 6 largest private taxpayers in Missoula County, Northwestern Energy, Montana Rail Link, Charter Communication (Spectrum), Southgate Mall and Verizon had property tax reductions of 20% or more.
Prior to the 2023 legislative session, the Department of Revenue informed the Legislature that reducing the residential tax rate from 1.35% to .94% would on a statewide basis maintain residential property taxable value at the same proportion to the total taxable value as was the case prior to reappraisal. This adjustment has been made several times in the past. This session the Governor and the Legislature choose not to make the adjustment and force residential taxpayers to absorb the new burden.