Time for the Legislature to take on tax reform

The upcoming Montana legislative session appears to be a continued domination of the Montana Republican Party. Last session it controlled both chambers of the Legislature and the Governor’s Office, and it appears to be the case again this November.

With that said, there is no reason the Legislature should not undertake a wholesale reform of the Montana tax system. The present system is broken and unfair. A balanced tax system in any state is a three-legged stool: equal parts of sales, income and property taxes that spreads the tax burden most fairly across all sectors.  

We do not have a general statewide sales tax so the tax burden is shifted to the income and property taxpayers, and since so much heavy industry has left the state in the last couple decades the residential taxpayers are forced to pick up the brunt of the property tax  tab.

That coupled with an archaic, unfair appraisal system makes the system untenable. It helps to push housing costs up and out of reach of many working-class Montanans.

There are several possible alternatives for the Legislature to consider:

An acquisition-based property tax system. California has used it for years. Under this system you pay property taxes based on the original purchase value, adjusted annually with a cost-of-living adjustment. That keeps property taxes in line for older homeowners. When their property sells for 10 times what they paid for it, the tax adjustment falls on the new homeowner.

Reform the appraisal system. It is presently a comparative system. Your home is valued based on what comparable homes have recently sold for. If you live in an older subdivision and paid $50,000 for your home 25 years ago, under the present system that home will be valued at whatever the neighbor properties sell for in the 2026 market. Both county government officials and Realtors love this system. Your property values keep inflating with every new sale. Home values could  be determined by the replacement cost, rather than comparable values. That would bring some rationality to the property tax system.

Consider a statewide general sales tax. We get millions of out-of-state visitors every year and except for the bed tax they pay virtually nothing to support our state and local governments. A sales tax can be developed to protect low and middle-income taxpayers (no taxes on food, medicines or other essentials) and some states even have rebate systems to return sales tax expenditures 

Break the $1 billion coal tax trust fund and use it more effectively to fund our crumbling state infrastructure — roads, bridges, schools. That would take a lot of pressure off local governments who are strapped for cash.

As the November elections approach it is appropriate for taxpayer voters to question candidates about what they would do to reform our unfair tax system. I recommend you throw these possible solutions at them and sound them out.

Don Larson lives in Polson.