Martin Kidston/Missoula Current

As the city and county of Missoula navigate this year's budget season, the drumbeat calling for change to the state's tax system continues to grow louder, with some officials going so far as to compare it to medieval England.

However they describe it, nearly all agree that Montana's reliance on property taxes is drowning low- and middle-income earners with higher costs while limiting local government's ability to provide basic services.

“It's an archaic system. It made sense in old England but today, a person's ability to pay isn't the wealth determined by their home. It's what they earn,” said Missoula County CFO Andrew Czorny. “Property tax cannot be the only source of income local governments rely upon to provide essential services to their residents. The Legislature needs to fix it and get the hell out of the way.”

With little in the way of new programs or services, the City of Missoula still settled on a budget increase of around 11% this year, adding $44 in taxes for every $100,000 of a home's assessed value. The county's proposed budget would add another $25 in taxes for a home of the same value.

The increases help cover an estimated 9% increase in the Consumer Price Index for the region – a measure used to track the cost of goods, including those that help fuel basic services like gasoline, which is up 37% year over year.

The cost of materials is also up around 21% from last year, natural gas up 47% and electricity up 4.3%. That doesn't include labor contracts the city and cost must meet, or an increase in pay for city and county employees to match cost-of-living expenses.

Other Montana cities are in the situation.

“Local government is being asked to do more and more that the state and federal government used to do. As they balance their budgets, they push things down to us,” said Dale Bickell, the city's CAO. “We're having to address more needs while pulling more from residential property tax. There's a perfect storm brewing.”

Some contend that some services could be set aside, and they've urged city and county government to live within their means. If they can't afford it, some have argued this past week, then they shouldn't be placing it in their budgets.

But city and county officials have been quick to reply, saying this year's budget, despite the increases, are lean and don't bring any new programs to the table. Rather, local officials have been steadfast in calling for changes to the state's tax system, saying it's based upon an economy that no longer exists.

“As has the U.S., Montana has shifted to a service economy, and that has changed our property taxes and has shifted the property tax burden to residential payers,” Bickell said. “There's been a substantial shift in tax base to residential payers.”

It wasn't long ago that Missoula County was home to several large industrial taxpayers, such as Smurfit Stone, the railroad and area lumber mills. While the railroad remains, the mills are now gone and taxpayers have been asked to step in and fill the taxation void.

“If we go back to 1983, we had four mills in Missoula County and they had a big footprint. Those mills covered 30% of property taxes, residential property taxes were low, and we had no tourists,” said Missoula County Commissioner Josh Slotnick. “The structure is broken. We have the same structure now but no big footprint industries. Residential home values are now high, and we have 2 to 4 million tourists that aren't paying. That whole structure needs to change.”

Elected officials also believe the policies set by the Montana Legislature haven't helped, including deep cuts to the Business Equipment Tax and tax breaks for the wealthiest Montanans.

“Policy setting by the Legislature plays a role,” said Bickell. “When those things are reduced, it's a direct shift to residential payers. Those are the things that have happened in Montana that our property tax system hasn't followed.”

As are other cities in Montana, local government in Missoula has called on the state to revise its tax system and allow cities and counties to pursue other revenue sources aside from property taxes.

The Legislature had allowed for a 2-cent local option fuel tax, which Missoula County voters approved to pay for road maintenance and repair. But the 2021 Legislature revoked that option, removing a tool that in some ways captured revenue from the millions of tourists who visit the city each year.

The state only allows a handful of small Montana “gateway” communities to implement a so-called tourism tax, but not the larger cities.

“Property taxes have gone up and up and up, and it makes me boiling mad,” said Slotnick. “We get between 2 and 4 million tourists every year. They're using our services every which way and not paying for them. Residents are subsidizing services for people who aren't paying. If all those folks paid, I guarantee property taxes would be less.”