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Issue Position: Improving Property Tax Reappraisal

Issue Position

Location: Unknown

In July 2008, the Montana Department of Revenue completed a reappraisal of all the residential and commercial properties and agricultural and forest lands in the state. By state law, these properties are reappraised every six years, so the last reappraisal before 2008 took place in 2002. Over this six year period, average residential property value statewide shot up 55 percent, and Montanans were very concerned that their taxes would do the same.

For most taxpayers, this concern was unfounded. One reason is that Montana law puts strict limits on how much state and local government can increase property tax revenue from one year to the next. So if property values go up a lot, mills have to go down to keep revenue growth within those limits. Moreover, in 2009 the legislature, as it had in the past, mitigated the effect of reappraisal by adjusting tax rates so that the taxable value of residential property on average wouldn't change, even though the market value had risen. Of course not all properties are average: some -- about half -- went up in taxable value; the other half went down.

The fact that properties are reappraised only every six years means that values change a lot from one reappraisal to the next, and although the legislature can soften the blow, the changes can still be pretty abrupt and cause taxpayers to experience a lot of "sticker shock."

The legislature also mitigated reappraisal by phasing new values in over six years, which means that the 2008 values will only be fully in effect in 2014. And since the same thing happened in the previous cycle, 2002 values only finally took effect in 2008. This means that between 2008 and 2014, property values for tax purposes will gradually grow from the appraised value in 2002 to the appraised value in 2008.

In other words, the value of your property for tax purposes this year has very little to do with what you could actually sell it for now. It is, rather, the best estimate of what you could have actually sold it for six years ago.

This means that if the value of your property has gone up rapidly in the last six years, you are getting a break; you're paying taxes on less value than you actually own. And if it has gone down, you're paying taxes on more value than you actually own. The six year cycle with phase in therefore results in an inequitable shifting of taxes burdens from fast to slow appreciating properties.

Since we now have the ability to perform accurate, fair revaluations on an annual basis, one way to fix all this is to have annual revaluations. That means your current property tax bill would be based on what your property is really worth right now. In 2011 I introduced legislation which would have put us on track to annual revaluations at the end of the current six year cycle. The Republican majority rejected the bill on the grounds that annual revaluations would cost too much. It turns out that there was more money in the budget than they thought -- certainly enough to make annual evaluations affordable and I believe well worth the cost. I intend to pursue this legislation again in 2013.

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