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North Dakota Voters Fail to Repeal Property Tax

We learn from Joe Henchman at the Tax Foundation's Tax Policy Blog that North Dakota voters yesterday "rejected a ballot initiative that would have repealed property taxes in the state. The initiative, Measure 2, failed by a vote of about 40,000 (23.45%) to 131,000 (76.55%)" even though the property tax is the most hated tax in America.

Henchman provided the following additional information:

"Measure 2 would have been, depending on the perspective, an $800 million blow to essential government services or merely the latest of a long string of taxpayer restraints on property taxation in the footsteps of California’s Proposition 13, Massachusetts’s Proposition 2-1/2, and recent property tax caps in Indiana, New Jersey, and New York. (We analyzed Measure 2 here.)

"One should not, however, interpret this defeat as North Dakotans rejecting tax relief. With an oil boom that has pushed the state's tax revenues up 44% in one year, and an average of 9% a year over the last fifteen years, reducing tax burdens is certainly possible. Many other resource-rich states do without one of the major taxes (although all have property taxes). Here, I think proponents had trouble with their contention that the solution to bursting state tax coffers is to eliminate the funding source and source of autonomy for local government. Because the repeal effort predates the oil boom, they did not emphasize, with numbers, that the state can both fund essential government services and reduce tax burdens."

Reuters concluded their story by noting:

"Supporters of getting rid of the property tax system argued that the state's oil surplus funds should be directed to local costs in lieu of property taxes. The problem is that North Dakota's oil income is already promised to fund other budget items in the state.

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"The defeat of the measure doesn't mean that property taxes in the state of North Dakota will remain untouched. A complete abolishment is off the table but property tax reform is likely according to The Bismarck Tribune. In the long run, property tax opponents may win the war despite losing this battle.

The Associated Press story in the state's Devil's Lake Journal closed by providing the following additional context:

"The state has had the nation's lowest unemployment rate, and the measure's supporters say North Dakota's government could afford to replace the local revenues.

"However, the amendment raised concerns among a diverse coalition of organizations, from the Chamber of Commerce to the state Farmers Union and groups representing local governments, public employees and school teachers.

"They organized a vocal, well-financed campaign, arguing the measure would transfer budget power from local governments to the Legislature and leave questions about which local projects lawmakers would have to pay for.

"We had all these diverse groups that came together and said, 'Listen, this is bad for North Dakota,'" Anderson said."

The AP also noted the leader of the coalition opposed to repealing the property tax was the president of the North Dakota Chamber of Commerce. In addition, the AP said that "No state has eliminated local property taxes," and cited the National Conference of State Legislatures as the source.

News of rejection of the effort to repeal the property tax even made it across the Atlantic where the UK's Daily Mail reported:

"Public school teachers and local governments throughout the state strongly opposed the measure as it would greatly affect the bulk of their revenues.

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"States often tweak tax rates but it is an unusual step to see a major tax completely abolished.

"The thorny issue of property tax was brought to public attention in 1978 when California's 'Proposition 13' to significantly reduce property tax rates in the state triggered a national campaign to limit property taxes."

Despite rejection of the referendum, the Wall Street Journal reported "the ballot initiative is expected to pressure legislators to take steps to lower property taxes when they go into session in January."


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