North Dakota May Consider Property Tax Abolition

March 31, 2010

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 Tax 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 tax 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 tax. 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.

Was this page helpful to you?


Thank You!

The Tax Foundation works hard to provide insightful tax policy analysis. Our work depends on support from members of the public like you. Would you consider contributing to our work?

Contribute to the Tax Foundation

Related Articles