BISMARCK, N.D. (AP) — North Dakota voters will decide this fall whether to eliminate the property tax, a first for the state and a major change that would require more than $1 billion annually in replacement revenue, according to early estimates from officials.
Secretary of State Michael Howe’s office said Friday that more than enough signatures had been submitted to allow the constitutional initiative to go on the November general election. Voters rejected a similar initiative in 2012.
Property taxes provide the basis for funding numerous municipal services, such as sewer, water, roads, prisons, auxiliary services, school construction and teacher salaries. They are “pretty much the most basic government service,” says Aaron Birst, executive director of the North Dakota Association of Counties.
Rising property taxes, often fueled by rising home prices, have frustrated people across the U.S. North Dakota’s initiative was approved for a vote while Nebraska lawmakers pored over more than 100 proposals to cut skyrocketing property taxes, with a plan set to be debated next week. Kansas lawmakers approved a compact property tax cut this year, saying property owners want bigger cuts.
The election campaign in North Dakota comes at a time when the state is enjoying a good financial position, particularly due to high oil and sales tax revenues.
The initiative’s leader, former Republican Rep. Rick Becker, said the measure would provide property tax relief. He said people often don’t fully understand the process surrounding property valuation and taxation.
“They think it’s unfair. They just wait for a letter saying how much their house is worth now, and that increase in value leads to higher taxes. But everyone still seems to be shifting responsibility because locals say, ‘We didn’t raise your taxes’ – we just pay more taxes,” said Becker, a Bismarck plastic surgeon and unsuccessful candidate for the U.S. House of Representatives.
If the measure passes, the state would need to replace over $1.3 billion annually starting in 2025, according to a preliminary estimate from legislative research. The state operates on a two-year budget, and the total estimated revenue for those two years, after subtracting amounts from the state’s current property tax credit program, would be over $2.46 billion, according to the estimate. The state expects to collect $5 billion in general tax revenue over those two years.
Becker said local governments would still be responsible for their budgets and would have to pay more to generate revenue than the flat annual amount that the state would cover. He proposed a combination of a fee or tax for “municipal operating costs” and infrastructure maintenance on each household and business. These would be fairer and more clear, he said.
Where the replacement revenue comes from is up to the Legislature’s discretion, Becker said. He suggested some could come from revenue from the state’s $10.7 billion oil tax savings.
Keep It Local, a coalition of groups with ties to agriculture, education, health care, public safety and other sectors, opposes the measure, saying residents could face “profound consequences” if the property tax is eliminated.
“The measure to repeal the property tax threatens our ability to fund essential local services, challenges our state legislature to cover a funding gap of approximately $1.3 billion per year, and jeopardizes the quality of life we value in our neighborhoods and cities,” Keep It Local chairman Chad Oban said in a statement.
The reconciliation bill would present House budget writers with a monumental task as they would have to rethink funding for countless items, said Republican Rep. Don Vigesaa, chairman of the House Budget Committee. The House research agency has already compiled a preliminary list of areas and programs that could receive funding, such as the state’s Operation Prairie Dog infrastructure fund, he said.
Regardless of the election outcome, property tax issues loom huge for the 2025 session, Vigesaa said. Term limits passed by voters in 2022 mean fresh legislators will ultimately replace long-serving members who have extensive knowledge of the budget process, he added.
Last year, the Republican-led legislature passed a package of income tax cuts and property tax credits worth an estimated $515 million.
