Gwen Jones: Tax structure must evolve to reflect changing economy
Property taxes on my house in Missoula’s Slant Street neighborhood have tripled since 2000.
Why such an increase? What is going on with property taxes in Missoula?
Missoula County levies and uses 19.7 percent of total property tax revenue, the city of Missoula levies and uses 29.6 percent, and Missoula County Public Schools levy and use 36.5 percent, but these three institutions still are challenged to keep up with the demands of a growing population.
Property taxes are rising, not because local spending is out of control, but because our tax structure has not evolved with our changing economy. As a result, property taxes have become the workhorse to fund local government. We need tax reform to modernize our tax structure, and I will make that reform a priority in my second term on the Missoula City Council.
Here’s what’s changed over the last 30 years: Our resource-based economy is largely a memory. Lumber mills, which generated lots of property taxes in the city, are long gone and today’s businesses are not as capital intensive. Our growth sectors are tourism and technology, which are not taxed at a local level.
Additionally, the Montana Legislature has repeatedly made cuts to business equipment taxes with no replacement. The lost revenue must be replaced for local government to provide essential services, so property owners pick up the tab to fill the void.
Residential property taxes have grown significantly in terms of their share of total tax revenues. In 1999 in Missoula County, residential property taxes made up 42.9 percent of the tax base; by 2018, they comprised 60.1 percent of the tax base. Our property taxes have effectively become regressive.
Meanwhile, expenses have increased for local governments. Federal and state cuts in spending have pushed many costs down to the local level. For example, severe cuts to the Montana Department of Public Health and Human Services drastically reduced help available to the mentally ill, leaving the city’s first-responders answering calls to assist residents suffering mental-health crises. In order to answer increased demand and maintain a safe community, we’ve had to add to our ranks in police and fire, which is the lion’s share of our general fund budget.
In a Billings Gazette column on March 25, 2019, Montana legislators Marilyn Ryan and Emma Kerr-Carpenter wrote: “When the Legislature fails to be creative about how to make our tax system fair, we put the burden on local governments to make up for that lack of funding by levying new taxes. Increases in your property taxes are a direct result of the Montana Legislature not doing its job.”
At a Montana League of Cities and Towns presentation in October 2018, officials from the Montana Department of Revenue emphasized a clear shift from business taxes to residential property taxes, and that our Legislature set the state’s budget on an unsustainable path.
Our system has left local governments with the responsibility and burden of managing a flawed system. If we are going to be the backstop, then we should be given tools by the Legislature so we can broaden our tax base and find new money. This means being able to decide, as a community, if we want a local-option tax focused on tourism and luxury spending, which could stabilize budgets and provide property tax relief.
I will advocate for reform in Helena when the Revenue Interim Committee meets on September 24 and 25. I urge Missoulians to contact your local legislators regarding this issue.
If elected to a second term as a Ward 3 city councilor, I’ll continue to work with my colleagues on council and with other communities in Montana to push for tax reform at the state level.
Gwen Jones represents Ward 3 on the Missoula City Council and faces a pair of challengers in September’s primary election.