hat
banner
banner
Montana Viewpoint
WHY IS A TAX INCREASE CALLED A TAX CUT?

October 28, 2002

When politicians tell you they’ve signed a pledge not to raise your taxes, you’d expect your property taxes to, well, stay the same. When the same politician tells you he’s cut taxes, by golly, I bet you’d figure your taxes were going down. I also bet you’d be wrong on both counts.

When it comes to cutting property taxes (income taxes haven’t been cut in years and years) legislators have a pretty easy decision. That’s because about 99% of the tax cut is at the expense of local governments, not the state. The average mill levy in Montana is 430 mills. Of that, only six mills (1.4%) go to fund the state university system. All the rest goes to fund towns, counties, fire districts, schools, and on and on.

But even though some business property taxes have been cut by millions and millions of dollars in the past ten years, I can almost guarantee you that property taxes on your home or small business have gone up dramatically anyway. That doesn’t seem to make sense, let alone be fair, but that’s the way it’s worked, and it’s been done on purpose.

When the legislature cuts property taxes, it cuts them for power companies, businesses, and railroads; not homes. This hurts a lot of local governments who depend on those taxes, so the legislature promises to reimburse them for whatever tax dollars they lose. They also give local governments the ability—and this is the important part—to increase mill levies if the reimbursement they get doesn’t entirely make up for the taxes they’ve lost.

Between 1995 and 2000, tax rates on business equipment have been cut 66%; on electrical energy generating facilities like Colstrip and the Noxon Dam by 50%; and on Railroads by 43%. (Because of Federal law, railroads must be taxed at the average commercial rate of the state they are taxed in. When business tax rates go up or down, the railroad tax rate follows.)

In that same period that tax rates for businesses, etc. were being cut, the average mill levy has increased by 11%, from 384.5 to 430 mills.

And since mills have gone up 11%, your home and small business taxes have gone up. That’s not rocket science, and neither is the fact that even though mills went up 28% in Billings from 1992 to 2001, the Exxon and Conoco refineries there paid less in taxes because the tax rate on their equipment went down 66%. Well, hey, somebody’s got to pick up the slack, why not us?

In Frenchtown, the Stone Container mill gets an annual $7,080,532 tax break on their equipment, and I’m sure they use it wisely. On the other hand, according to the Office of Public Instruction, the Frenchtown School District mill levy has gone from 226.31 mills in 1992 to 315.95 mills in 2001—up 40%. County mills went up, too, from 105.8 to 125.65—19%.

In Sanders County, the Montana Power Company (now PPL) and Avista got a 50% tax cut, and the county mill levy has gone up 66%, Lincoln County homeowners have seen a 59% increase in county taxes, and Mineral County taxes have gone up 18%.

It’s a slick trick! Legislators get to cut taxes, and then they get to accuse local governments of raising taxes. Talk about the best of two worlds!

So next time your local “no new taxes” politician tries to tell you he’s kept the faith, take it with a sack of salt.

[Data used are from the Montana Department of Revenue and the Office of Public Instruction]

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620

jim@jimelliott.org