Flowers and Karlen said they are still working on several other bills on the issue, but outlined three main proposals that they believe would work in combination but would also be beneficial if just one or some of them were passed.

The first option would be to create a property tax exemption that would exempt the first $50,000 of the value of a home from taxation, as well as the first $200,000 of a Class 4 commercial property, which includes small businesses and certain commercial and industrial properties.

The second proposal would change property tax rates to a six-tier structure, where the primary owner of a residential property would have to pay more taxes as the value increases. Homes valued between $50,000 and $500,000 would be taxed at 1%, and rates would increase from there based on four higher tiers. The Tier 6 tax rate for homes valued over $1.5 million would be 1.89%. Currently, residential homes up to $1.5 million are taxed at 1.35%, after which the rate increases to 1.89%.

The third proposal would create a tax credit, which Democrats call a “housing equity tax,” to offset the cost of rising property taxes for Montana retirees, renters and low- and middle-income homeowners. The idea is based on a bill Karlen introduced in 2023 that would have given homeowners with annual incomes of less than $30,000 a tax credit to cover property tax costs. Karlen's bill was rejected by Republicans in the House.

Karlen said for those who qualify, the tax credit will increase in proportion to their property tax bill, saying it will be a “safety measure to make sure no one falls through the cracks.”

Flowers and Karlen said the plan would result in an estimated $214 million reduction in property taxes, a 15 percent reduction in taxes paid on a state median value home and a $14 million reduction in business taxes. They said the proposals would also result in a $100 million reversal of the corporate tax shift, which, when all changes are taken into account, would result in $90 million less for the state coffers.

Flowers said Democrats are confident that even with less revenue for the state, the same revenue will be expected for districts and schools. With a projected budget surplus of $700 million to $800 million, the package should be “one of the highest priorities” for lawmakers and the executive branch.

Flowers and Karlen said raising tax rates on higher-value homes should offset some of the revenue the general budget would receive from lowering tax rates on lower-value homes. Democrats also hoped to introduce bills addressing tax exemptions and loopholes for commercial real estate to offset the revenue shortfall.

“Most businesses here have experienced, in our opinion, inappropriate exemptions and loopholes. And so the burden has fallen on the residential property owners, because it's essentially a zero-sum game,” Flowers said. “And when residential property taxes go up, industrial and commercial property taxes go down, and that's exactly what's happened. And we want to bet a little bit on that.”

Flowers said Democrats see their proposals as a long-term solution that will need to be adjusted over time given changes in Montana's economy and revenue sources.

When asked how business might respond to more taxes being passed on to them and their influential lobbyists, Flowers said companies would also benefit from the commercial real estate exemption and that they are looking for ways to make it easier to hire workers in areas with high costs of living.