You will recall the fond memories of last summer’s proposed ballot initiative to drastically cut property taxes for one company, Charter Communications, while raising property taxes on homeowners across the state. In case you need to be reminded, here is a great editorial from the Billing Gazette.
The company eventually withdrew its proposal, sparing the voters from a complex and unfair ballot initiative last fall.
But the company and its competitors are back at it again. On Thursday, the House Taxation Committee will hear a proposal to change how the Department of Revenue calculates property taxes for centrally assessed companies. The bill, SB 394, proposed by Senator Mark Blasdel, amends the current property tax exemption for “intangible personal property.” Senator Blasdel argued in the Senate Taxation Committee hearing last month that this bill simply codifies the Montana Supreme Court ruling on this topic.
However, the bill goes well beyond current law, and four companies – the largest telecommunication companies operating in the state – stand to benefit. According to the Department of Revenue, this bill will exempt nearly all of these large corporations’ property from taxation.
Beyond putting in place bad policy that further erodes taxation on these large corporations, this bill will have real repercussions on the state and homeowners. First, the state of Montana will lose out on over $10 million each year, from lost revenue tied to the statewide mills. This revenue could cover over half of the costs for Early Edge, to support early childhood learning for thousands of four-year-olds in Montana. But even more important, this bill with shift nearly $50 million in local property taxes to homeowners and small businesses across the state.
Why the shift? The state legislature caps the amount local governments can raise from property taxes. When the legislature cuts taxes on one class of property, this results in a reduction in taxable value for the entire local taxing jurisdiction. In order to maintain current revenue levels, the local government or school district must raise its mills on all property owners. Schools, roads, and public safety still cost the same regardless of how much Charter or Verizon pay in taxes. So if they pay less, then homeowners and other property owners will be forced to pick up the rest.
This shift in who is paying property taxes is not new. Montana homeowners represent about half of all property taxes paid in Montana, and that proportion has increased over time, as the state has cut taxes on other property classes (like centrally assessed companies and business equipment).
Not only is this bill unnecessary, but it will expand tax cuts for these large corporations. It will also likely lead to more litigation, which will result in critical revenue for our schools and local governments bottled up in protest accounts (another topic we have discussed here before).
This bill will, yet again, ask homeowners to pick up more of the tab to support our communities. We hope our policymakers will consider their constituents and make sure these corporations are paying their fair share.