Fern was yea on property tax bill, nay on income tax bill

Dave Fern split his vote on a couple of end-of-session tax bills passed by the state Legislature.

He voted against an income tax bill that lowers the top income tax rate, saying it was too expensive. Fern, a Democrat, represents Senate District 2, which includes the cities of Columbia Falls and Whitefish.

House Bill 337 reduced the state’s top-bracket tax rate down from 5.9% to 5.4% over the biennium. In addition, it raises the maximum threshold for the state’s lower tax bracket, where income is taxed at a lower 4.7% rate. It also expands the earned income tax credit for families with lower incomes.

It was signed into law by Gov. Greg Gianforte.

Fern said he opposed HB 337 it because it was too expensive. The bill would trim state revenues by about $270 million.

An income tax bill he sponsored, SB 155, had a sliding scale to the tax rate which favored the middle class. It had a fiscal note of about $160 million, but it failed in the House after passing the Senate.

But Fern did support a House Bill 231 and its complimentary Senate Bill 542  that will reduce property taxes for primary homeowners, i.e. homesteads.

He carried House Bill 231 on the Senate floor, which lowers the tax rate on primary households, while raising rates on secondary homes.

The bill has a sliding rate structure. For homes with a value that is less than or equal to the median value, the rate is 0.76%. For homes that are greater than the median value but less than two times the median residential value the rate is 0.9%.

But the rate for a home with a market value that’s four times or greater the median value will see a tax rate of 1.9%.

The idea is to reduce the taxes on working-class primary residences.

HB 231 includes a $400 rebate on primary residences and also reduces rates for landlords who offer long term rentals.

It increases the tax rate on secondary homes and vacation rentals to offset the cuts to homesteads. In addition, some large businesses, like refineries, will see tax increase, but Fern said 85-90% of Montana businesses will see a reduction.

The Homestead property tax measure was also endorsed by Gianforte, as property tax relief was a priority for his administration.

Fern said the tax issue will see greater scrutiny in the interim session and he’ll be on the interim finance committee.

One topic is a statewide sales tax, which could be used to “buy down” school mills. Schools make up about half of the average residential property tax bill.

“We’ll see,” he said. “There’s a lot of conversation.”

Properly crafted, sales taxes can work, while having a minimal impact on residents. In Columbia Falls, a resort tax is targeted at things a visitor would buy. It raises about $1.5 million a year for the city and is used to pay for the fire department and more police officers, among other things.

Fern was also pleased that the state put more money toward behavorial health, something he campaigned on in 2024. 

He also supported House Bill 924 which creates a trust for a host of different things, from water projects to bridges to early childhood education.

He objected to it being called a “slush” fund by critics.

“The majority of the GOP don’t like it because we didn’t send the money back (to taxpayers),” he said.

While Fern is a Democrat, he worked closely with Conrad Republican Llew Jones, who championed many of the big bills this session.

“Rep. Jones is a very intelligent guy,” Fern said. “He likes to think out of the box.”

He said overall the session was a success and legislators worked to get things done.