Montana lawmakers face a critical decision in the 2025 legislature on whether to reduce property tax assessment rates to prevent rising taxes for homeowners—a task they did not accomplish in the 2023 session. Residential property market values are expected to increase by 21% in 2025, according to the Montana Department of Revenue. To mitigate this increase, a proposal suggests lowering the residential assessment rate from 1.35% to 1.11% for the upcoming biennium.
In a recent meeting with the Legislative Revenue Interim Committee, senior economist Jared Isom highlighted that the projected 21.45% increase might exceed expectations. The situation mirrors the 2023 session when lawmakers were advised to offset value increases by reducing the rate to 0.94%, but the legislature did not act, resulting in a 21% median property tax increase for homeowners. This increase was only partially mitigated by two $675 rebates that required applications.
Data shows that residential property taxpayers currently bear 59% of the tax burden, compared to 38% in 1994. Preliminary estimates indicate that without a rate reduction, taxable values will rise by about 21%, increasing taxes by an average of 11%. Some counties may see market values surge by 25% to 32%. Adjusting the rate to 1.11% could reduce the average tax hit by 8.1% compared to maintaining the current rate.
The discussion also addressed implementing revenue-neutral taxable values across different property classes. This would result in slight tax increases for commercial, agricultural, and forest landowners, partly due to rapid residential property growth. Committee vice chairperson Rep. Mark Thane requested further analysis on tax neutral rates based on pre-2023 values, a suggestion echoed by public commenter Evan Barrett.
Fiscal analyst Kurt Swimley estimated that $70 million in revenue could be generated from rising property taxes without adjustments between fiscal years 2025 and 2026. The residential property class remains the most valuable in Montana, growing faster than other classes. Rose Bender from the Montana Budget and Policy Center argued that cutting the rate benefits higher-value homeowners more than proposals like the governor’s Property Tax Task Force’s homestead exemption, which suggests different rates for homes based on value.
The task force’s recommendation, included in the governor’s recent budget proposal, suggests a 1.1% rate for primary residences and long-term rentals up to $1 million, and 1.9% for additional homes and short-term rentals. Bender emphasized targeting benefits for those on fixed incomes. Some Republicans on the committee voiced concerns about shifting tax burdens and advocated for reduced government spending instead.
Sen. Jeremy Trebas criticized the idea of shifting payment responsibilities and called for transparency. Rep. Sherry Essmann supported Trebas, suggesting an evaluation of state expenses. Before the legislative session, the committee must finalize revenue estimates for the next budget cycle. They agreed to a preliminary estimate, planning to reconvene to refine the figures, which will guide budget decisions for the upcoming fiscal years.
2.3-DOR-Taxable-Value-Neutral-Rates-Presentation
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