North Dakota generates tax revenue in three main ways: sales tax, income tax, and property tax. The state also has a Legacy Fund that is worth nearly $7 billion dollars to draw from.
One law maker wants North Dakotans to vote to abolish property taxes, and make up the revenue-gap from mostly the oil tax and Legacy Fund. But, other lawmakers say this proposal would be unsustainable and the timing is off.
State Representative Rick Becker is sponsoring the measure to eliminate property tax in North Dakota.
“When we do this, North Dakota becomes the only state in the nation to have no property tax.”
Beckers says it will create economic growth in North Dakota. “That is going to be the biggest driver for new businesses to come to the state. It’s going to cause the state to become economically diversified. Which is one of our goals. Has been for decades. And, it’s going to address the workforce shortage.”
Which Becker says will offset the revenue-gap created by eliminating the property tax.
“It creates an economic boom, and from that we get increases in the amount of income tax because there’s more people, and sales tax because there’s more activity,” said Becker.
But, North Dakota’s Tax Commissioner Ryan Rauschenberger says abolishing the property tax might not be as doable as Becker makes it sound.
“I think the timing is interesting,” said Rauschenberger.
The Coronavirus has down-turned the economy and global tensions have dropped the price of oil by half since the beginning of this year.
“We do have a stock market that is on the decline, and we do have have extremely low oil prices, and the proponents are saying this is supposed to be funded primarily by stock market gains from Legacy Fund earnings and oil,” said Rauschenberger.
Senator Erin Oban doesn’t disagree that North Dakota has done a good job at generating a nearly seven billion dollar revenue-base, but she says Becker’s proposal is not sustainable and it will lead to cuts in critical programs and services for local communities.
“Not in the long run. I mean maybe for a year. Maybe for two years. Maybe for ten years. But, I am not willing to budget an entire state that way,” said Oban.
Oban points out that locally-elected officials are responsible for determining how their locally collected property tax is budgeted towards things like law enforcement, roads, parks, and schools.
“We have been extremely lucky in North Dakota that we have had oil and Ag, other energy sources that are helping to pay our states bills, to a much higher percentage than what it actually appears. My concern is in the long run, we can’t control those even in the short term, so how are we gonna tell local communities that you should completely eliminate your property tax revenues, and we’ll make up for it at the state. It’s just not going to happen,” said Oban.
In contrast, Becker says North Dakota’s large revenue-base is being mismanaged.
“So we look back at the last ten years and say wow we’ve had this huge amount of revenue, and what we’ve done is spent it all. We’ve grown government. What we could be doing with it is decreasing the tax burden for all the residents, the voters, and the citizens of North Dakota,” said Becker.
He says local communities will not be stripped of their ability to determine local budgets.
“The cities and the counties remain in complete all the subdivision remain in complete control of what they do. You’re looking at these counties for instance, have a big pot of money that all the tax payers pay into. The property tax owners. From that point they take that point of money, and they form a budget. They spend it how they want. The only thing that changes is now the state is using those excess revenues to fill the pot of money. They are one hundred percent in control of how they budget, when where and how they spend it,” said Becker,
Becker and supporters will need to get nearly 27,000 signatures by July 6th to have the plan appear on the general election ballot. If they succeed, voters will decide on November 3rd.
“Really it just comes down to philosophical difference about what taxes are fair and not fair, and some would say no tax is fair because somebody is going to have a disproportionate liability than somebody else,” said said Rauschenberger.
North Dakotan voters turned down a similar constitutional measure in 2012 with nearly 77% of the vote.