BHI/ Eliminating Property Taxes in North Dakota Page 2
Property tax revenue provides funding for some of the most visible services on which citizensare most dependent, including: public safety, education and recreation. For local governments,the property tax evolved as a dependable way to raise revenue. Since it is hard to evade, theproperty tax is easy to collect and thus a stable source of revenue barring events such as thecurrent housing crisis, natural disaster and out-migration. In North Dakota, property taxescomprised 24.6% of state and local revenue in 2010.
However, recent developments suggestthat local government reliance on property taxes is problematic.The property tax remains one of the most unpopular taxes, in part, because it is a regressive tax.Property taxes bear no relationship to income or the ability to pay and, as a result, they can be ahard burden on the retired and elderly citizens on fixed incomes. In addition they burden thosefacing medical and economic setbacks. Moreover, a good part of the public believes thatproperty taxes, which rely heavily on assessments, are inherently unfair.
In response,taxpayers since the late 1970s have placed constitutional or legislative limits on the ability of
local municipalities to collect or increase property taxes. With North Dakota’s commodity
-driven economy booming, and the values of real estate escalating
the debate over propertytaxes is now center stage.
Fast growth can create supply shortages forcing property values toincrease, generally faster than a
homeowner’s earning power
, especially those on a fixedincome. Thus, property taxes can give government entities with property taxing authority awindfall at the expense of homeowners.Measure #2 will be on the June 12, 2012 election ballot to abolish property taxes in NorthDakota, except for special assessments. If approved by the voters, the ballot measure wouldamend the state constitution and prohibit imposition of property taxes on all real property inthe state. Without a doubt, this measure would greatly change the nature of public finance inNorth Dakota. State government would be constitutionally required to meet all the legalobligations of local government identifying state revenue sources and other state resources tofill the gap.At a time when many states in the nation suffer elevated unemployment rates and persistent
budget deficits, North Dakota’s position is exceptional. In
December 2011, the unemployment
State of North Dakota Office of State Tax Commissioner
2010 Property Tax Statistical Report
Local Tax Policy: A Federalist Perspective
(Washington, DC: Urban Institute Press, 2003): 57-70.
Dale Wetzel, “Tax commissioner candidate wants property tax study,”