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North Dakota May Consider Property Tax Abolition

2 min readBy: Joseph Bishop-Henchman

North Dakota’s Secretary of State yesterday approved a ballot measure to abolish the state’s property taxes for circulation. If 26,000 valid signatures are gathered, the measure would be on this fall’s ballot. (See the language here, PDF.) The sponsors are a group called Empower the Taxpayer.

In 2007, North Dakota and its local subdivisions collected nearly $700 million in property taxes. That’s a big hole to leave in the budget, as David Brunori of TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Analysts wrote earlier this week (subscription req’d):

If Empower the Taxpayer has its way, there would be a constitutional prohibition on all property taxes. The news reports say that Empower the Taxpayer represents angry citizens fed up with big government. But property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. revenue in North Dakota goes to schools, counties, towns, and municipalities. If tax abolitionists eliminated a local tax, what big government would they be taking on? Of course, eliminating the property tax is a ridiculous idea. I’ve never met anyone who didn’t want a community with teachers, police officers, firefighters, and someone who answers 911 calls.[…]

Every state imposes property taxes because there’s no other way to efficiently pay for local government services. Doesn’t anybody read Wally Oates anymore?

Wallace Oates is a scholar on fiscal federalism issues, whose work suggests that the property tax is the best way for local governments to keep control over their revenues.

Brett Narloch of the North Dakota Policy Council responds:

Does Empower the Taxpayer really want do away with teachers, police officers, and firefighters? Do they want to “cut off local government at the knees” like Sen. Andrist suggests? Of course not.[…]

The measure specifically states that state government must completely fund the legal obligations of the local governments and do so by simply providing block grants to local governments. The money is controlled 100% by the local governing authority.

The measure would actually restore local control in various ways. Education funding currently has strings attached.[…]

If times are tight, local governments may only get money for things that are absolutely necessary. Constitutionally and morally questionable expenditures, such as economic development grants and certain types of welfare spending, may have to be cut, which is a good thing.

Third, local governments have the option to raise revenue by other means. The most popular is a sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. . If the legislature short-changes local governments on programs beyond those that local governments are legally obligated to fund, community leaders still want to fund them, and the people also demand those programs, then passing a sales tax ordinance to raise revenue should be an easy task to accomplish. Local governments, of course, have control over such revenue.

I’d be curious to hear readers’ reactions to these two arguments, and on the idea of abolishing a major tax in a state.