State wants your ideas on tax system How should Montana be taxed? Should your property taxes be based on the square footage of your house?
Should they depend on the price you paid when your originally bought your house, or the amount you would get if you sold your house right now?
Has the state gone too far in giving tax relief to companies?
Should Montana have a sales tax?
Those are among the questions that are being considered by a state panel that's asking Montanans how to change the tax system. The Interim Property Tax committee, consisting of a dozen members of the state Legislature, will hold hearings this week in Missoula and Hamilton. Later hearings are planned for Kalispell and Whitefish.
"We will listen to anybody who shows up, and we hope a lot of people do. If we have to stay there until midnight, that's fine with us,'' said Sen. Barry ''Spook'' Stang, D-St. Regis, who chairs the committee.
The panel began its work in July. It's looking for ways to revise, reform or replace the property-tax system. Eventually, it will make recommendations to the next session of the Legislature.
So far, several principal suggestions have emerged:
- Property taxes should not be based on today's market value of homes, according to critics who suggest a variety of other methods. Typically, they argue that the taxes on a home should reflect the homeowner's actual investment - not what the house theoretically would bring if it were sold to somebody else.
Basing property taxes on the acquisition price - instead of the current market value - would provide some protection for people who plan to live in their homes indefinitely. They wouldn't be affected if other homes soared in price. But the idea has been opposed by the real-estate industry, which fears it would encourage people to hang onto their homes instead of trading up.
''I have some mixed emotions about it, but there are no simple answers,'' said Sen. Gerry Devlin, R-Terry. Under the present system, ''there are people who have been in their homes, raised their families, and the house is their dearest possession. Then, all of a sudden, their taxes go up and it's a hardship,'' he said.
Rep. Alvin Ellis, R-Red Lodge, also favors making the change. ''People can understand having to pay property taxes on the value of an asset - when the value is based on what they paid for it,'' he said.
Missoula Mayor Mike Kadas, a former legislator who focused on government finance, said the change would ''offer a level of security that people would appreciate.''
''The proposal that makes the most sense, over the long run, is to use acquisition value, so whatever you pay for your home becomes the basis for what you are taxed. There could be a capped amount for an inflation adjustment,'' Kadas said.
House Speaker John Mercer, R-Polson, also argues that taxation should not be based on the current market value of homes, but he sees other possibilities besides using the acquisition price. A formula could consider the square footage of the house, its proximity to government services and other factors, Mercer said.
Taxes should depend on ''things that are objective,'' Mercer said. Under the current system, ''I don't know how people will have peace of mind,'' he said.
- Another proposal calls for a property-tax exemption on perhaps $20,000 to $30,000 of the value of every home.
Senate Minority Leader Mike Halligan, D-Missoula, said the exemption would shift some of the tax burden away from low-income and middle-income families. It would be equitable, applying to all homeowners, and it could be small enough to minimize its impact on government revenue, he said.
''If we're going to look at property-tax relief, it should focus on homeowners,'' Halligan said. ''Many low-income and elderly homeowners are being taxed out of their homes, because of the increases over the past 12 years.''
Rep. Emily Swanson, D-Bozeman, is another advocate of the exemption.
''Homeowners have really picked up a huge share of taxes, as it has shifted away from businesses. The next phase of tax reform needs to focus on the homeowner,'' Swanson said.
''Property taxes, many feel, are too high. If people feel that, the Legislature has a responsibility to address it,'' she said.
- A sales tax, overwhelmingly opposed by Montanans in the past, is being suggested again.
Sen. Mike Sprague, R-Billings, said a 4 percent sales tax would be appropriate - especially if it's called a ''consumption tax,'' to make it less unappetizing, he said.
''I've voted against every sales tax that has ever come down the pike,'' Sprague said, ''but our job in the committee is to find solutions - property-tax relief. It's kind of like going to the doctor: You don't necessarily have to like his prognosis, but you'd better not ignore it.''
Sprague said the tax could be earmarked for education. It should replace other tax revenue, instead of providing additional funds, he said. ''Montanans are looking for relief, not an additional burden,'' he said.
''What is the alternative? Let's consider reality,'' Sprague said. ''All should pay for education. Everyone could pay a consumption tax that would go only for education.''
Each suggestion has its opponents. Rob Natelson, a founder of Montanans for Better Government and a leading critic of government spending, said the suggestions seem to avoid the most important issue: ''They're trying to take too much revenue from Montanans,'' Natelson said.
A sales tax has been suggested previously and ''it's clear that no particular sales-tax proposal is acceptable to a majority of Montanans,'' he said. ''There is no coalition of forces that can pass a sales tax in any particular form. They are wasting their time.''
Property taxes seem onerous because the wages in Montana are low, Natelson said. If an exemption or other changes cause a greater dependence on income taxes, ''it could make matters worse,'' he said.
''Have we learned nothing from 20 years of property-tax referenda, sales-tax referenda? I wish, for once, they would stop repeating the same things, over and over, that they've been talking about for 20 years,'' Natelson said.
Nancy Keenan, state superintendent of public instruction, said tax reformers should look at the breaks that have been granted in the past. Oil and gas producers have been granted relief; business-equipment taxes have been reduced, she said.
''Over the years, in giving property-tax relief, the burden has shifted to homeowners. Sometimes, you have to look back - don't assume that the policies made in the past are good for the present. You have to review it all,'' Keenan said.
''There comes a time when we have to look at all the taxes we've reduced, and see if we should start inching them back up,'' she said.
Dennis Burr, president of the Montana Taxpayers Association, said he favors a sales tax but it would be fruitless to seek one.
''The public has not supported it, and I do not believe they will in the near future,'' he said.
Stan Nicholson, a Seeley Lake economist who studies government financial matters, said public discussion should include an appraisal of services: the quality of schools; the condition of county roads. ''In some ways, the most important questions are on the spending side of things, not the taxing side,'' Nicholson said.
''Rather than just talk about property taxes, they need to hear about the consequences of the way the tax structure is evolving,'' he said.
Rep. Bill Carey, D-Missoula, said the current system doesn't provide enough support for government programs. ''We're not raising enough money to fund the necessary services and invest in Montana's future,'' he said.
''Everybody's trying to do what's fair,'' Carey said. ''But I don't think there's any general agreement about what is fair.''