montana capitol 2023
Snow falls on the Montana State Capitol on Friday, Jan. 23, 2023. Credit: Samuel Wilson / Bozeman Daily Chronicle

House Republicans voted down a Democrat-backed bill Wednesday that would have used income tax credits to ease the squeeze placed on lower-income homeowners and renters by rising property taxes.

House Bill 280, sponsored by Rep. Jonathan Karlen, D-Missoula, aimed to offer a state income tax credit to homeowners making up to $130,000 a year to reimburse them for a portion of their property tax bill. It would also have let renters claim a credit for a portion of their rental bill assumed to be attributed to property tax.

“It is a tax cut that provides meaningful long-term property tax relief that working and retired Montanans in all of our communities need,” Karlen said.

A fiscal analysis by the governor’s budget office estimates the bill would have provided aid to 87,000 households and cost the state General Fund about $82 million a year, producing an average credit of approximately $940 a household. In comparison, a long-term tax cut focused on income taxes rather than property taxes, which is moving through the Legislature with the backing of Gov. Greg Gianforte, would cost the General Fund about $170 million a year.

Karlen’s bill, which narrowly passed the House Taxation Committee on an 11-10 vote Feb. 7, failed 38-62 on the House floor Wednesday, with all but six of the House’s 68 Republicans opposing it.

House Republicans previously forwarded a billion-dollar-plus spending package that includes short-term property tax rebates of up to $500 a year for 2022 and 2023, but lawmakers of both parties have said they believe the state needs to look at ways to address property taxes on a long-term basis. Democrats have also voiced concern that the rebate package doesn’t include direct property tax relief for renters.

Rep. Dave Fern, D-Whitefish, said during Wednesday’s floor debate that he believes the Legislature needs to take action to head off a Proposition 13-style tax revolt. That measure, passed by California voters in 1978, placed strict limits on how fast property taxes could grow, triggering decades of turmoil for public budgets. A Montana initiative modeled on Prop 13 failed to qualify for the Montana ballot last year after a coalition of industry and labor groups from across the state’s political spectrum spent hundreds of thousands of dollars lobbying against it.

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According to the Montana Department of Revenue, tax collections on residential land and property in Montana in 2022 totaled $1.1 billion, a 70% increase over 2012. The department has also said it expects the assessed value estimates used to calculate residential property taxes to rise by 43% in 2023. 

“If you don’t like what you hear from the sponsor, then come up with a better proposal. But we better address property taxes at this level — at a statewide level,” Fern said Wednesday.

Many Republicans have, however, blamed rising property taxes on alleged frivolous spending by cities, counties and school districts. Several GOP lawmakers said Wednesday they were hesitant to use state resources to address what they consider a local government spending problem.

“I think we have better ways to attack this issue than by throwing budget money at it,” said Rep. Terry Falk, R-Kalispell.

“The state did not create the property tax problem, and it’s not our job to fix the property tax problem,” said Rep. Jennifer Carlson, R-Manhattan.

Noting that a majority of property taxes go to schools and that many property tax levies are approved in local elections, Carlson also said she worries that subsidizing the local property tax burden would give local governments leeway to grow their budgets.

“It’s the voters’ job to stop voting for things they don’t want to pay for,” Carlson said.

Karlen countered that most property taxes go to popular local programs.

“The system we have in Montana is that local governments essentially derive all of their income from property tax,” he said. “With that system in place, if we’re not cutting police, if we’re not cutting fire, if we’re not cutting other essential services — then the way I see it, at the state level we need to be making sure seniors aren’t being priced out of their homes.”

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Eric came to journalism in a roundabout way after studying engineering at Montana State University in Bozeman (credit, or blame, for his career direction rests with the campus's student newspaper, the Exponent). He has worked as a professional journalist in Montana since 2013, with stints at the Great Falls Tribune, Bozeman Daily Chronicle, and Solutions Journalism Network before joining the Montana Free Press newsroom in Helena full time in 2019.