Viewpoint: Montana needs careful tax reform, not half-baked property-tax-cap initiative
In the next few weeks you might well be asked to sign a petition to put CI121, a constitutional initiative to “cap property taxes,” on the ballot. We urge you to say no.
CI121’s backers claim that it will slow the growth of your property taxes and the revenue (and spending) of school districts and local governments. But there is no assurance that the initiative will do either of those things.
Montana law strictly limits how much schools and local governments can raise revenue from year to year. That means that the growth of property taxes, on average across all properties, is also strictly limited. But the tax bills for individual properties don’t all grow at that average rate: tax increases on rapidly inflating properties will exceed the average, while tax increases on properties that are inflating slowly will fall below it.
CI121 works by rolling back the values of residential properties to their 2019 levels, and limiting how fast the values can grow in the future. But for most places in the state, CI121 does nothing to prevent schools and local governments from raising revenues just as they do today, so if residential properties pay less under CI121, non-residential properties - businesses, farms and ranches, and forests - must pay more.
And because the initiative leaves the definition of “residential” property to the legislature, some dwelling spaces – apartment houses, for example, or mobile home parks – may end up among those non-residential properties that pay more.
Even this shift of taxes away from residential property is not guaranteed, because CI121 limits the growth of the appraised value of residential property, but not its taxable value. Presently, by law, the taxable value of a residential property equals 1.35% of its appraised value. But there is nothing in CI121 that would keep the Legislature from raising that percentage, in order to prevent the shift in taxes from residential to non-residential property.
If the legislature did that, some residential property owners would still benefit from the initiative, but only at the expense of others. That’s right: depending on what the legislature does, as a result of CI121, the property taxes on your home could increase more than they otherwise would. And regardless of what the legislature does, under CI121 young families moving into their first homes will pay higher taxes than their established neighbors, and families who change homes, or significantly improve an existing home, will pay a lot more than they did the year before.
Another provision of CI121 caps the taxes on a property to 1% of its appraised value. That conflicts with state law that currently allows the schools, cities and towns, and counties in some, mostly urban, areas to impose combined taxes in excess of that cap, and the legislature will have to resolve that conflict. CI121’s promoters claim those governments will simply have to get along with less, but fortunately for the fiscal health of their budgets, that’s not certain.
The legislature can, and probably will, decide to make up the revenue shortfall somehow, but how is anybody’s guess. What is certain is that any residential tax relief provided must be paid for, with lower expenditures or higher taxes somewhere else.
We know residential property tax relief is essential, and that voters should expect the legislature to provide relief that is fair, efficient, and helps the taxpayers who most need it, without decimating local government and school district budgets. The legislature should not be hamstrung by the ill conceived provisions that CI121 would amend into Montana’s Constitution. Both the Constitution itself, and the taxpayers, deserve better.
Dick Barrett, Missoula and Brian Hoven, Great Falls