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North Dakota Considers Eliminating Property Tax

Since Californians shrank their property taxes more than three decades ago by passing Proposition 13, people around the nation have echoed their dismay over such levies, putting forth plans to even them, simplify them, cap them, slash them.

home with fence
home with fence

In an election here on Tuesday, residents of North Dakota will consider a measure that reaches far beyond any of that — one that abolishes the property tax entirely.
“I would like to be able to know that my home, no matter what happens to my income or my life, is not going to be taken away from me because I can’t pay a tax,” said Susan Beehler, one in a group of North Dakotans who have pressed for an amendment to the state’s Constitution to end the property tax.

They argue that the tax is unpredictable, inconsistent, counter to the concept of property ownership and needless in a state that, thanks in part to wildly successful oil drilling, finds itself in the rare circumstance of carrying budget reserves.

“When,” Ms. Beehler asked, “did we come to believe that government should get rich and we should get poor?”

An unusual coalition of forces, including the North Dakota Chamber of Commerce and the state’s largest public employees’ unions, vehemently oppose the idea, arguing that such a ban would upend this quiet capital. Some big unanswered questions, the opponents say, include precisely how lawmakers would make up some $812 million in annual property tax revenue; what effect the change would have on hundreds of other state laws and regulations that allude to the more than century-old property tax; and what decisions would be left for North Dakota’s cities, counties and other governing boards if, say, they wanted to build a new school, hire more police, open a new park.

“This is a plan without a plan,” said Andy Peterson, president and chairman of the North Dakota Chamber of Commerce, who acknowledged that property taxes have climbed in some parts of the state and that North Dakota’s political leaders need to tackle the issue. “But this solution is a little like giving a barber a razor-sharp butcher knife — and by the way, this barber is blind — and asking him or her to give you a haircut. You’ll get the job done, but you might be missing an ear or an eye.”

Polls conducted last month and last week suggest that voters here overwhelmingly oppose the ballot measure to ban the property tax.

Still, even if the measure here fails on Tuesday, the notion is picking up steam in some Republican circles in other states, including North Carolina, Texas and Pennsylvania.

“No tax should have the power to leave you homeless,” said Jim Cox, a state representative in Pennsylvania who has proposed legislation to eliminate the school property tax in the state where, he said, such taxes have led to residents’ losing homes to sheriff’s sales, entering into reverse mortgages or simply moving away.

In a way, North Dakota, though 48th in population among the states, was a logical place for such a movement to brew. While the state’s property tax collections per capita generally fall near the middle among states, the surge in oil production over the past five years, mainly in the western portion of the state, has seen its effects ripple through other parts of life here. The state’s coffers are full, overflowing even. Assessments of home values, especially in some areas, have risen drastically too.

The political mood here, too, leans toward Republicans (who dominate Bismarck), small government, little intrusion and fiscal conservatism. Though opponents to the property tax here received a $12,000 donation in 2010 from the American Tax Reduction Movement, a sister group to the Howard Jarvis Taxpayers Association, which grew out of California’s Proposition 13, members say the efforts here were largely organic, the result of unhappy property taxpayers getting fed up.

“The same problem kept coming up,” said Charlene Nelson, a homemaker who became a leader of the effort to amend the Constitution, pointing to what she deems the underlying problem with the property tax. “It means all of us are renters — none of us are homeowners.”

In recent years, state officials sent more money to localities to pay for schools in an effort to lower property tax bills. But opponents of the property tax said those efforts did not go nearly far enough, and collected nearly 30,000 signatures on petitions to bring the matter to the ballot.

Those who want to keep the property tax have vastly outraised the opponents, gathering more than $500,000, campaign finance reports show. Though the question is among four on ballots here on Tuesday — including the highly contentious question of whether the University of North Dakota should give up its Fighting Sioux nickname — residents here said they had been deluged with information about the property tax measure, on signs, in radio talk shows and through months of debates in school gymnasiums and recreation halls in small towns like Edgeley and Bowman.

For his part, Gov. Jack Dalrymple, a Republican, said he opposed the property tax ban. “It’s mind-boggling, really,” he said, in an interview, of the effects of such a ban. “We’d be changing everything, frankly.”

The notion, he said, that the state has enough surplus to replace property taxes for localities around the state without raising other taxes is false. For starters, he said, much of the state’s benefits from the oil boom are already dedicated legally to particular funds and cannot simply be transferred to support schools, counties, towns, park districts and the like.

Even if the ban fails, North Dakota lawmakers now seem all but certain to tackle broader solutions to the property tax question as early as next year.

“I have to say that we totally understand that North Dakotans are very concerned about their property tax payments,” Mr. Dalrymple said. “You have a tension there, and people say this can’t keep on.”

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