How New Tax Laws Will Change Montana’s Landscape

Missoula, MT (KGVO-AM News) - Where do our taxes come from?

According to The Center on Budget and Policy and Priorities:

“Half of all federal revenue (50 percent) comes from individual income taxes. The income tax is generally progressive: higher-income households generally pay a larger share of their income in income taxes than lower-income households do.

Another 36 percent of revenue comes from payroll taxes, which are assessed on the wage or salary paychecks of almost all workers and are used to fund Social Security, Medicare, Hospital Insurance, and unemployment insurance.”

A Look at Where Our Taxes Come From and Where They Go

Here in Montana, according to the Montana Legislature:

“Montana property owners and Montana-based businesses pay over $4 billion in income, property, consumption, and production taxes every year. Revenues come from three general areas, including: Property tax ($1.6 billion); Individual and corporate Income Tax ($1.3 billion); Other licenses, fees, and taxes such as motor vehicle and selected sales taxes on tobacco, alcohol, and fuel ($1.1 billion).”

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The just-concluded Montana legislative session has passed a final property tax bill, SB 542, to help mitigate excessive property tax bills due to the rapid increase in property values in the state.

Robert Storey with the Montana Taxpayers Association Commented on SB 542

I spoke with Robert Storey on Thursday, Executive Director of the Montana Taxpayers Association about the bills passed by the legislature.

“That bill is basically a modification of the work that the governor's property tax advisory committee put together over the summer and fall and presented in a bill that was originally House Bill 231, in the end, most of the ideas that were in that original bill were transferred over into Senate Bill 542, that became the bill that passed the legislature,” began Storey.

Storey described the benefits of the bill for property owners.

“It significantly reduces the tax rate on residential, owner-occupied residential property, and so their taxes will go down, to some extent, back to maybe in the neighborhood of where they were a couple of years ago before the large increase happened in 2023,” he said. “I don't know if they'll actually get below that number, but they'll be reduced from what they would be (without the bill).”

Storey said, however, that owners of second homes will be hit hard by property taxes.

“The thing about that bill is, if you own a second home, your taxes are going to go up significantly on that, probably to the extent that they'll overcome any tax decrease you get on your primary residence,” he said. “It makes the system a whole lot more complicated. And as we said in our commentary, progressive, meaning that the higher value of your home is, the higher the tax rate is, and those are the higher the taxes you will pay compared to a home of lower value.”

Storey said Montanans Universally Oppose a Sales Tax

I asked Storey about a topic that Montanans universally oppose, namely, a sales tax, to be a vehicle to permanently lower property taxes.

“Our economy has changed now,” he said. “We don't have the timber companies and the mining companies and those types of industries to export our taxes to. So, basically 80 percent of the tax base is residential property, and they use most of the services. And if we don't want to pay for it, we've got to have another source of revenue, and one that more mirrors our tourism economy…but we're not there yet.”

Some Republicans were opposed to passing SB 542, hoping that a special session might be called to address the issue, but the measure passed, and subsequently, the legislative session closed.