The One-Way Property Tax Ratchet

The One-Way Property Tax Ratchet

Our current property tax system essentially functions as a one-way tax ratchet, where property taxes increase but almost never decrease, and where one vote by a small plurality in a single election can lock in a permanent tax hike

Kalispell Mayor Mark Johnson recently had some choice words to share about the Montana legislature’s proposals to rein in the growth of property taxes. Johnson blasted the legislature as being self-interested, claiming “they don’t look out for the cities, they don’t look out for the state, they don’t look out for the counties. They look out for themselves.”

Notice there is no mention of who legislators really should be looking out for: the taxpayer!

The subject of this sharp criticism was a collection of bills arising from Governor Gianforte’s Property Tax Task Force aimed at placing more constraints around voted property tax levies. SB 204 from Senator Greg Hertz would sunset voter-approved local property tax levies every 10 years, requiring local governments to go back to voters again for reauthorization. Another bill from Sen. Hertz, SB 205, would require a minimum voter turnout for a levy to pass and raise the threshold of votes needed to pass a tax hike in instances of low turnout. HB 20 from Rep. Larry Brewster would require most voted tax levies to be in dollars rather than “mills”, which will help control the growth of property taxes when taxable values increase.

These proposals are all common sense measures to control the growth of property taxes and provide long term tax relief. However, local government lobbyists have come out in strong opposition, making some absurd claims in their effort to kill the bills.

Some opponents claim these proposals would “disenfranchise” local voters”. But how exactly does requiring continual voter approval of tax levies “disenfranchise” voters? If anything, the sunset proposal increases democratic participation. The fact is that tax levy votes are among the least representative of our elections. The decision to approve property tax hikes is usually made by a tiny fraction of residents, often less than 25% of eligible voters. Allowing a small, organized plurality in an election to impose permanent tax increases on the rest of residents is not very fair or democratic.

Others claim that regularly going back before voters to reauthorize tax levies would be too “challenging”. But shouldn’t it be challenging for the government to raise taxes? That’s the whole point of a limited government. As a property taxpayer, I certainly don’t want it to be easy for my taxes to be increased. Tax hikes should be the last resort.

The opposition also argues that these reforms will jeopardize funding for schools, firefighters, and public safety because voters could potentially reject a previously approved tax if given another opportunity. Well, it’s awfully ironic to me that the opposition can on one hand argue about disenfranchising voters while at the same time argue that we cannot trust voters to make wise decisions about funding their government. They are trying to have their cake and eat it too, at the expense of taxpayers.

The truth is that our current property tax system essentially functions as a one-way tax ratchet, where property taxes increase but almost never decrease, and where one vote by a small plurality in a single election can lock in a permanent tax hike. I can understand why the opposition seems hell bent on defending this system, it’s nearly perfectly designed to capture as much tax revenue as possible from us taxpayers.

The legislature’s tax levy proposals are steps towards reforming this one-way tax ratchet to make our property tax system more fair and democratic. Requiring increased community consensus, buy-in, and transparency in order to raise property taxes will also help ensure that the tax burden stays within the bounds of the local community’s ability to pay for it for the long term.

This column originally appeared in Lee Newspapers.

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