I'm so glad you asked. It’s important to understand how property taxes work because they’re the biggest source of tax revenue for local governments (cities, counties and school districts). The state and feds rely more in income taxes.
THE MILL LEVY
Property taxes are based on a property’s value. Once the value is determined, local governments assess – or levy – something called a mill. Think of one mill as $1 in taxes for every $1,000 of a property’s taxable value. (Another way to express it would be $.001 for every $1 of taxable value.)
Here’s how it works: If my home has a taxable value of $3,000 and the city decided to levy 100 mills, then my tax bill would be $300, or $100 for each thousand dollars of taxable value.
You can also see why actual tax bills vary around the city, though every pays the same 100 mills. Property values vary. The state calculates taxable values by looking at sale prices and then applying various deductions and tax rates that vary based on the type of property. For instance, in Montana homes and most businesses pay the same tax rate. Farmland and property owned by nonprofits pay a different rate.
HOW LOCAL GOVERNMENTS DETERMINE MILL LEVIES
First, the city adds up the taxable values of every piece of property within the city limits. Let’s say it’s $100, 000, 000. (That’s called the city’s tax base.) Then the city multiplies the tax base by the value of one mill ($.001). The result is how much city would raise for each mill it levies:
$100,000,000 (total taxable value in the city) X .001(one mill’s value) = $100,000 (what one mill in taxes will raise citywide)
Let’s say the city decides it needs to raise $60 million. If you divide $60,000,000 by $100,000 (what one mill would raise) you get 600 mills. That means each property owner in the city would have to pay $600 for every $1,000 of their property’s taxable value.
THINGS THAT CAN MAKE PROPERTY TAXES RISE
1. More government spending. (New bond issues, inflation in the cost of services, shifts in state and federal spending.)
2. Higher property values. (Every few years the state reassesses all the property in Montana. It’s a nervous time.)
ONE THING TO REMEMBER: IT ALL ADDS UP
A person’s property tax bill includes mill levies from the city, the county, local school districts and even state government (mostly for education). We even pay special property taxes in our individual neighborhoods for things like street repairs, sidewalks, street lighting, etc. They call these SIDs, or Special Improvement Districts.
WANNA SEE TAX MAN'S PROPERTY TAX BILL?
It's a public record.