A point in danger of being lost amid the chaotic action and inflamed rhetoric in the Legislature this spring is that the state's billion-dollar budget surplus almost certainly is an aberration. A large state surplus is historically unusual, and the magnitude of the predicted surplus is unprecedented. Unprecedented events aren't something you can count on.
Also, much of the money lawmakers are fighting about doesn't actually exist - not yet, not in the form of actual revenue. What we all so glibly refer to as a billion-dollar surplus actually is an educated guess of the state's general fund balance assuming spending and tax collection continue for another two years at their current pace.
What all this argues for is a conservative approach to budgeting. Specifically, it would be a mistake to treat an unusual and unexpected surge of tax revenue as a dependable, perennial flow of money. One-time money should be used for one-time purposes.
That favors the governor's proposed homeowner rebates, not a permanent cut in property tax rates. The former isn't contingent on revenues continuing to flow as projected; the latter portends a budget crisis with the first significant downturn in the economy. A rebate acknowledges the state collected more taxes than it needed; a permanent tax cut assumes that situation would be ongoing.
Although Republicans apparently agree with Democrats that property-tax payers deserve a break, it's worth remembering that property taxes didn't create the billion-dollar surplus. Income taxes are the most significant contributor. Doing something for property owners (especially homeowners) makes sense because they comprise a class of taxpayer largely overlooked in past tax-cutting by the Legislature. In fact, to varying degrees, past tax cuts have shifted tax burden from the state to the local level, resulting in higher property taxes. But permanently cutting property taxes based on a one-time surge in income tax and other taxes is a mistake.
Go with the rebates. If the budget picture stays as rosy as today, send out another round of checks in two years. Meanwhile, let's start talking about doing something to make Montana's property taxes more predictable and manageable. Change the basis of taxation from appraised value to acquisition value. That is, base property taxes on the amount someone pays for it, not on what you theoretically could sell it for. That way, people will know at the time of purchase roughly what their future property tax bills will be. So will state and local governments. Switching to acquisition value will make property taxes fairer and protect taxpayers from tax bills that rise beyond their ability to pay or control.
Do that and send us a $400 check, and we'll all be happy.
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