Just over two months from now, North Dakota voters will decide Measure 2, a ballot initiative that would repeal all property taxes in the state. According to one estimate, local governments currently raise about $800 million through the 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. , although the pressure for the initiative comes from a booming state economy and state budget: tax revenues in the state rose 44 percent in just one year. (We previously covered the proposal here.)
In our past polls, Americans consistently rate the 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. as one of the taxes they like the least, just behind gasoline taxes and car taxes, and ahead of most other taxes. That’s no surprise, as it’s visible and large to those who pay it. Recent experience also reminds us that property tax payments usually stay steady even as valuations plummet, due to the ability of local government to ratchet up the millage rate. This in turn has often led to taxpayer outrage, such as with Proposition 13 in California in 1978, Proposition 2-1/2 in Massachusetts, and the recent property tax caps in New York and New Jersey.
On the other hand, property taxes are hated precisely because they are so visible and so local. If a reform proposal simply “swaps” property taxes for a less-visible, less-local tax, without reducing the actual tax take, it’s hard to call that a win for less government. It’s unclear what will happen in North Dakota if Measure 2 passes, with proponents saying the state has plenty of money to send to local governments and opponents saying that other taxes will have to go up. Another option, one-time rebates, generally succeed neither at restraining government growth nor reducing property tax burdens.
Word comes in from Pennsylvania on a bill introduced there, modeled after the North Dakota proposal. So while homeowners in every U.S. state currently pay property taxes, that may soon change.
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