Legislative Notes
HB 231’s hidden tax shift hurts Montana agriculture
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Sen. Bob Phalen, R-SD1
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I write to inform Montanans about the real impact of House Bill 231, the property tax bill that recently became law. While marketed as “property tax relief,” this legislation creates a massive tax shift that will significantly increase the burden on our agricultural community.
During legislative debate, we attempted to highlight a critical flaw in this bill that supporters ignored: Montana’s floating mill system means this isn’t tax relief—it’s tax redistribution. When residential and small commercial properties receive rate cuts while agricultural land rates remain unchanged, local governments must raise mill levies to maintain their budgets. Agricultural landowners will pay these higher mill levies with no offsetting rate relief.
Here’s the math: If residential properties that previously contributed 60% of local tax revenue now contribute only 45% due to rate cuts, agricultural properties must make up that 15% difference through higher mill levies. A farm worth $1 million could see tax increases of 25-30% or more, despite no change to agricultural tax rates.
This creates clear winners and losers. Residential property owners—especially in urban and suburban areas—win big with rate cuts up to 77%. Small businesses also benefit with commercial rate reductions. But agricultural landowners lose significantly, facing substantial tax increases to subsidize these cuts.
The economic implications are troubling. Montana’s farmers and ranchers already compete in challenging global markets with thin profit margins. Adding thousands of dollars in annual property tax increases threatens their viability. Family farms considering succession will face higher carrying costs. Agricultural businesses—from equipment dealers to grain elevators—will see their tax burdens jump.
This policy fundamentally alters Montana’s tax landscape, creating incentives to convert agricultural land to residential development and disadvantaging our rural communities. It’s a rural-to-urban wealth transfer disguised as tax relief.
Montana’s economy depends on agriculture—it’s our largest industry, employing over 60,000 people and generating billions in economic activity. Yet this bill treats agricultural landowners as a revenue source to fund tax cuts for others.
I fought against this bill because I knew it would harm agricultural Montana. The floating mill system makes tax cuts for some property classes impossible without tax increases for others. We should have crafted genuine tax relief that didn’t pit different sectors against each other.
Agricultural landowners will see their tax bills arrive soon and wonder why their taxes increased while their neighbors’ decreased. They deserve to know this was the predictable result of HB 231’s flawed design.
Montana’s agricultural community deserves better than being the hidden funding source for others’ tax relief. We must find ways to provide real property tax relief that doesn’t sacrifice our state’s most important economic sector.
