BRIAN LELAND
In 2010 the Chicago-based National Association of Realtors spent over $600,000 to gather signatures and promote a Montana Constitutional Initiative to prohibit any voter approved real estate transfer tax.
Backed by the Montana Association of Realtors it was billed as preventing a tax on top of property taxes. While it is made for an easily digestible sound bite, as a local option it could have averted the skyrocketing property taxes now seen in certain areas of the state.
Between COVID refugees and the show “Yellowstone” the tsunami of out-of-state people and money in Gallatin County has been staggering.
In August of 2021 alone, Gallatin County had $221,880,423 in residential and commercial property sales. It’s worth noting Big Sky and the Yellowstone Club are in Madison County.
The new money has priced locals out of the housing market and increased property taxes. Bozeman opened a new high school in 2020 at a cost of $91 million and it is currently at 85% capacity.
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Bozeman just moved into a new Law & Justice Center and fire station at a cost of $43 million. Belgrade just put online a new $43 million sewer plant. The project initially launched in 2020 can only serve the town’s current boundaries.
Every corner of Gallatin County has some growth-related infrastructure need, be it schools, roads, water, sewer, fire, or law enforcement. Flathead, Yellowstone and Missoula Counties, among others, are seeing this same trend.
Real estate activity is the first indicator of economic development, and with development the infrastructure needs are immediate.
Instead of relying on bonding and property taxes to fund all public projects, a real estate transfer tax would harness part of that economic activity and some of the irrational exuberance in the real estate market to pay for growth.
It is this “irrational exuberance” that the real estate industry covets. If you buy a house and live in it, you see the tax once. If you are a land speculator or a house flipper you pay it on each transaction, and as a line item, the cost comes directly out of windfall profits.
This in turn slows down the rate of ownership turnover. Which is exactly what the Realtors never want to see. The average real estate commission is around 5.5%, so in August 2021 alone Realtors in Gallatin County took in around $12.2 million.
A local option real estate transfer tax could be tailored to the community. Ag land could be exempt if it remains in production for a certain amount of time. An exemption or reduction for first time home buyers could be included, the same for family transfers.
Big time out-of-state money from the real estate industry convinced Montanans in 2010 that one size fits all 56 counties and that the interests of Realtors are more important than the interests of the taxpayers.
If the Legislature is really committed to property tax relief they would modify CI 105 to keep the state from imposing a state wide real estate transfer tax but allow cities and counties to vote on a local option.
Brian Leland, Bozeman, is an electrical contractor and an engineering graduate of MSU.