A measure pitched by the Democrats in the Montana Legislature would take aim at rising homeowner property bills by offering an income tax credit, offsetting a portion of property tax payments for homeowners and renter households earning up to $150,000 a year.Rep. Jonathan Karlen, D-Missoula, told the House Taxation Committee Tuesday that his House Bill 154 would address situations where rising property taxes become an insurmountable financial burden for low- or middle-income homeowners.“This bill is the backstop that ensures our constituents don’t receive a property tax burden that exceeds their ability to pay,” Karlen said.With Democrats the Legislature’s minority party, however, it’s unclear whether the pitch will secure the support necessary to head to the governor’s desk. A similar bill picked up enough Republican votes at the House tax committee in 2023 to advance to debate on the House floor, where the Republican majority voted it down.This year, Republicans have generally voiced support for other property tax ideas — among them diverting bed tax dollars to property tax relief and a bill backed by Republican Gov. Greg Gianforte that would try to reduce taxes on primary homes by raising them on second homes and Airbnb-style short-term rentals.The income tax credit approach, in contrast, would essentially provide property tax relief by tying together property and income tax collections.Under Montana’s current tax system, most property taxes flow to local government services such as law enforcement and schools. State income taxes, in contrast, flow to the state General Fund to pay for state-level programs like health programs and prisons.Some local governments, school districts especially, have complained about tight budgets in recent years even as property taxes on residential homeowners have soared. The state budget, in contrast, has run large General Fund surpluses in recent sessions — enough so that lawmakers used those extra income tax dollars to pass both permanent income tax cuts and one-off income and property tax rebates in 2023.By offering credits that homeowners and renters could claim on their annual state income tax filings, Karlen’s proposal would use the currently flush state budget to offer property tax relief on an ongoing basis. The exact amount available to each taxpayer would depend on their income and the size of their tax bill. Renters would be allowed to assume that 15% of their rent is attributable to property taxes.A family with a household income of $50,000 and a $3,000 property tax bill, for example, would be eligible for a $1,200 property tax credit. If their tax bill rose by $500 while their income stayed the same in subsequent years, the credit would increase to $1,575 — offsetting three-quarters of the increase.Karlen argued in the committee hearing Tuesday that his proposal, which has an estimated price tag of about $100 million a year, should be considered similarly to the 2023 tax rebates in that it uses dollars that would otherwise head to the flush General Fund to provide Montanans with property tax relief.Karlen also suggested that the bill could be an alternative to other tax cut proposals coming before the Legislature this year — an apparent nod to Gianforte’s pitch to reduce the state’s primary income tax rate from 5.9% to 4.9%, a proposal that could reduce General Fund revenues by an estimated $350 million a year.“We spent hundreds of millions of dollars last session giving property tax rebates,” Karlen said. “All of that money came from the General Fund.”Supporters of the tax credit approach at Tuesday’s hearing included progressive groups and a new tax relief coalition, Montanans United for Sustainable Taxation, that includes some local governments.Rose Bender, a researcher at the Montana Budget and Policy Center, argued that the tax credit proposal would avoid situations where lower-income residents end up with unduly burdensome tax bills. She also testified that 29 states currently have similar policies in place.“One of the main reasons property taxes have gotten so imbalanced is that property taxes are not connected to ability to pay,” Bender said.Republicans on the House tax committee appeared skeptical Tuesday. One who had supported the 2023 version of the bill, Great Falls Republican Rep. George Nikolakakos, said he was worried that this year’s measure could make it too easy for local governments to pass voted levies by minimizing how much impact those levies have on their tax bills.“I see we have a $100 million fiscal note for this tax credit — that’s state money that will be going to subsidize local governments for what they do, and then allowing local governments then to just spend more money,” Nikolakakos said.Karlen responded that he thinks it makes sense to use the state’s strong revenues to address local concerns.“We have local governments struggling to fill their potholes and people struggling to pay their property taxes,” he said. “What this does is provide a little bit of relief.”The post Democrats pitch property tax relief via income tax credit appeared first on Montana Free Press.