The 2025 session has adjourned and delivered on its promises of tax relief — but will taxpayers think they did enough? Republican leaders vow retribution for those in their ranks they felt betrayed the party. And the Capitol Talk team gives their biggest takeaways from this session.
Capitol Talk is MTPR's weekly legislative news and analysis program. MTPR's Sally Mauk is joined by Montana Free Press State Editor Holly Michels and Lee Banville, Director of the University of Montana School of Journalism and Professor of Political Reporting.
Sally Mauk: Holly, the Legislature wrapped up its business a few days early, and except for some notable complaints, lawmakers on both sides of the aisle say they've accomplished what they promised. That includes legislation to lower Montanans' skyrocketing property taxes.
Holly Michels Yeah, Sally, some kind of legislation to deal with property taxes for residential homeowners was one of the big things lawmakers from both sides of the aisle, plus the governor, agreed needed to happen this session. And before we even gaveled in here, the governor knew what his preferred vehicle for that was, and he cited it throughout his campaign, and that's what he called the Homestead Exemption Act.
That policy works to lower the amount a primary home or home that's used as a long-term rental, the amount of that home's value, that is taxed, that in turn lowers the property tax bill for that property. And since property tax collections need to stay roughly level, unless you cut the local services that they fund, that package increases the rate of tax for second homes and properties used as short-term rentals like Airbnbs.
So, we heard critiques of that policy throughout the session. There were concerns that it'd be a challenge for people to apply to the Department of Revenue to let them know that their home should be in that lower tax rate group. We also heard about people who maybe inherited family cabins and aren't wealthy but do end up having second homes that they can't afford the taxes on. And then this dynamic that we really heard a lot of in the final days of the session, but also throughout, was that this policy would raise taxes on big businesses, like the refineries in Billings, as an example we heard frequently.
Supporters of the policy point out those big industrial properties didn't get hit with the same roughly 21% increase in property taxes that residential properties around the state saw in recent years.
And we also, when these bills were being debated, heard a lot of debate over if fee land within the borders of reservations would automatically qualify for this exemption, which did end up in the bill.
Also, this was a pretty big deal at the end of the session; the city charters for Montana's largest city, Billings and one of its smallest, Sunburst has some pretty big conflicts with this policy that lawmakers think they've addressed but have acknowledged the potential that that might still be a lingering problem.
So, in the end, we did see this Homestead Exemption Act, though altered from its original form. That's what cleared the session, but it ended up being in a two-bill package with the fate of those two bills tied together. One of those bills actually contains a $400 tax rebate for this tax year, which is a nod to the lateness with which this policy actually passed the Legislature. Gianforte wanted this done early to be able to implement this for this tax year, but that didn't happen. And then we also now have that this policy is going to be phased in over a couple years to give the revenue department time to figure it all out.
So, the final two bills we saw, House Bill 231 and Senate Bill 542. They were also amended so heavily to the point where some people in the final days of the session were arguing that they actually violate laws about the bill's contents not fitting within its title. There were some light, I would say, references to potential lawsuits down the road. So, these have passed for now. We'll see what happens and we'll see what tax bills look like when this takes effect through a couple of the next years.
Sally Mauk: Lee, Republican Llew Jones was one of the main architects of the property tax legislation and acknowledged not everyone was going to love it.
State Rep. Llew Jones We're going to have to recognize that in this state where the residential shift has been so enormous, both relative and real, that something has to be done.
Sally Mauk: The question is, Lee, will Montana property owners feel that what's been done is enough?
Lee Banville: I think that is the biggest question coming out of this session is this was the issue going into the Legislature. And the question will be, do voters feel like the Legislature and the governor really tried to address the real pain people are feeling as their home values soar, which is great, but that also drags up your property tax bills. So, the governor, along with Llew Jones, they came up with a solution that they hoped would at least be able to check the box and say, 'Okay, you're going to have some immediate relief through the $400 tax credit, and that there are longer term initiatives that will hopefully start to rein in questions like the overall value of property. But I think there's also the underlying pressure of is this hurting business and is this actually pushing away wealthy landowners who might actually also be able to support the sort of tax revenue base of Montana by buying those expensive second homes. You know, there's a lot of questions coming out of this session, but I think that is kind of remarkable, is they did cut a deal at the very end because it really did seem pretty up to the end that it might all fall apart. But it also speaks to how much people really care about this issue and how much the Legislature and elected representatives feel like they really have to address it.
Sally Mauk: Lawmakers, Holly, also passed an income tax cut, and that was a high priority for Governor Gianforte. Here's what he said:
Gov. Greg Gianforte: This historic tax cut will not only help hard working families and small business owners keep more of what they earn, but it will also help create more good paying jobs, grow our economy and help more Montanans achieve the American dream.
Sally Mauk: The Governor, Holly, has high hopes for what this tax cut will accomplish.
Holly Michels He does, Sally. Since he first took office, Gianforte has made it a priority to lower the state's income tax. We've seen laws passed to do that in previous sessions following his election for the first time in 2020.
The bill that passed this year is not as large of a cut as Gianforte originally proposed, but the legislation from Speaker of the House Brandon Ler did drop the top-tier rate for income tax from 5.9% to 5.4%. That'll be phased in over the next two years.
Then the bill also raises the amount of money a person or a couple can make and still be in the lower income tax bracket, and it expands the earned income tax credit that hits lower income families. So altogether, these cuts will mean about $278 million in reduction to the revenues the state collects every year from income tax. That's according to estimates from the governor's budget office, and this bill passed along mostly party lines in its journey through the session.
Supporters, like we heard Gianforte say there, say that this bill puts money back in the taxpayers' pockets and that it also makes Montana an attractive place for people to want to relocate to, or businesses to move to, or for people to open up businesses in the state. Opponents, however, say it's a big hit to the state's general fund, that that could mean cuts in services down the road, and they also point out that an income tax like these benefits wealthy people more than others, and that's because wealthy people earn more, so they pay more taxes. Montana Free Press reporter Eric Dietrich actually did some calculations that show an individual who earns about $50,000 a year would end up saving about $167 a year on their taxes, while somebody who earns $200,000 would save just over $1,000.
Sally Mauk: Lee, Governor Gianforte has to be pretty happy with this session. With the exception of trying to reform the judiciary, he got most of what he wanted.
Lee Banville: Yeah. I mean, what you see coming out of the Legislature, is a very, actually, I would say fairly traditional Republican view of economics, right? Which is, the income tax was a high priority, although with the additions that Holly was just talking about, it does have some more effects for lower income Montanans, but it really is about cutting the taxes for the wealthiest with the hope that they will do investments and build businesses that will lead to more employment for other Montanans. Not to harken back to the 80s, but it is a little bit of like what they used to call trickle-down economics, that you cut the taxes for the wealthiest and that will actually benefit everybody. And that is the model that Gianforte has unveiled here and that is a model that actually the Legislature has endorsed for a couple of sessions where we see income taxes dropping.
But it also is part of the reason why property taxes then become so very hard to deal with, because with the lack of a sales tax, right, there is no revenue that most local jurisdictions can use other than property taxes to run the services like schools and local transportation and police and safety issues. And so, what you see is it doesn't eliminate the burden that those local communities have, but it basically makes it like, 'Okay, well, we're going to even rely more on property taxes.' And so as income taxes dry up, it really does raise the importance and the complexity of dealing with property taxes.
Sally Mauk: Well, thanks to nine moderate Republicans, Holly, Democrats also got a lot of what they wanted out of this session.
Holly Michels They really did, Sally. So, the 18 Democrats in the Senate leveraged their numbers this session by finding ways to partner with those nine Republicans that we've talked about on the show all session long, who broke from the majority of their party over key issues, starting way back on the first day of the session in January. So that voting bloc in the Senate, through that, Democrats were able to get some of their key priorities across the finish line. That included Medicaid expansion. They got some things worked into property tax bills that they wanted to see. They also saw a childcare scholarship bill across the finish line and they also flexed their power when it came to votes on the state budget. That really flared up in the last week or so of the session when Republicans, including those in leadership in the Senate, tried to cut spending from the budget and that group of 18 Democrats and nine Republicans over and over rejected those amendments which kept those Democratic priorities in the budget.
We also saw Minority Leader Pat Flowers end up with power in that position as Minority Leader that we haven't seen before, including how much power that role has to shape these special committees that often form at the end of the session to tinker with major bills. And we heard from Democratic leadership over in the House, too, that a lot of their policies advanced this session. House Minority leader Katie Sullivan attributed that to her caucus picking up 10 seats in that chamber in the elections that were held last year after redistricting. But we did hear frustrations that Democrats weren't able to leverage their power on certain things like the “bathroom bill,” which passed this session and is already the subject of litigation. So, there were some limits to being in the minority, even as we heard Republicans in the Senate sometimes label themselves in the minority in the face of that 27-member strong voting bloc we saw.
Sally Mauk: As Holly just hinted, not everyone left Helena happy. Conservative Republicans like Senate President Matt Regier feel like the nine Republicans who consistently voted with Democrats betrayed their party, and he warned them there will be a reckoning. Here's what he said.
Senate Pres. Matt Regier: I don't believe the people will stand for another session where the Democrat Minority Leader and his caucus controls the Senate.
Sally Mauk: Lee, I think there could be some interesting Republican primaries in the next election.
Lee Banville: I believe that is a very safe bet to make, Sally. I mean, I think that the Republican leadership is livid, that they really kind of lost control of the Senate, right? They had a majority. It seemed like they could just kind of walk in. I mean it is true what Holly just said about the majorities were narrower than they were two years ago, but they still are walking into this session feeling pretty confident and it all went sideways, right? And it all went sideways really at the beginning because of a fight about these nine and whether the Republican majority should marginalize them when it comes to legislative policymaking; and that was a decision that the leadership made that basically blew up in their face and spent the entire session struggling to deal with that.
I mean, it's kind of a remarkable quote that the Senate president says - you know, Matt Regier - essentially that the minority is running this House. That is kind of a remarkable thing to say because they didn't need to, but they ended up having much more sway than I think anybody walking into the session thought was going to happen. And it really came down to a fight that the Republicans picked with themselves about how to make assignments to committees and where the power was going to lie. And so, yes, I expect that we will see enormous fights in some of these primaries in the upcoming legislative fights, but there's also the underlying question of, okay, if they have a majority, how much does the legislative leadership actually speak to that majority and foster them, or do they pressure them and say, 'You have to do this or we're going to fight you in the primary.' It may hinge on whether they're successful in knocking some of those nine off.
Sally Mauk: Lastly, guys, what is your biggest takeaway from this session? Holly?
Holly Michels To me, I think it's the thing we've been talking about this whole time, the division in the Republican party. That's been something that's marked my entire time. 2017 was my first session. And we saw Medicaid expansion in 2019 and just how much that dynamic really affects the policies that shape Montana.
Sally Mauk: And Lee?
Lee Banville: I would echo what Holly just said. I do think that what we see now is the messiness of legislation when, yes, one party runs the executive and they run the legislative, but that doesn't equate to leadership getting to say exactly what's going to happen. And what we know is, actually, you need to negotiate and that's compromise, and that is what the legislative process is.
Sally Mauk: Well, my biggest takeaway is how valuable the Capitol press corps is, not just in informing the public, but in holding lawmakers — I'm looking at you, Senator Ellsworth — accountable. So, I want to give a big shout out to all the hard-working reporters who covered this session so well, including you, Holly, and your team. Bravo.
Lee Banville: I'll echo that as well. Thank you, Sally. And thank you, Holly, and the whole team over there.
Sally Mauk: And this is, with the end of the session, the end of Capitol Talk. And Holly, Lee, it's been a genuine pleasure meeting with you guys every week. Thank you so much. And a big thanks to our behind-the-scenes producers, Ed, Chris, and Jake. I hope to see you all on the trail this summer.
Holly Michels Yeah, here's to more time outside of the Capitol basement.
Lee Banville: Yeah, it was a pleasure. Thanks.
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