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Lloyd Omdahl, Published April 11 2011

Omdahl: ND property tax ban will fail

A constitutional amendment is being proposed by a citizen petition to abolish the North Dakota property tax. The measure will appear on the June 2012 election ballot for a vote of the people. It is a pipedream and will lose at the ballot box for several reasons.

1) The development of alternative funding sources and returning money to the local governments is too complicated for a sudden elimination of the tax. Having been in the middle of the effort to replace the personal property tax, I can report from experience that it took the whole decade of the 1960s to iron out the conflicts and replacement revenue.

Repeal of the personal property tax was simple when compared to this proposal to eliminate

$775 million in local government revenue without a plan for replacement. To replace that kind of money would require doubling the state sales tax or tripling the income tax, something sales tax payers and income tax payers would not welcome. Higher energy taxes are out with some folks already thinking that the oil and coal industries ought to have tax cuts to foster economic growth.

2) Abolition of the real estate tax and replacement with other taxes would shift the tax burden from current payers to a different group of payers. Obviously, that’s what the sponsors of the proposal want to see happen. This assumes that the current payers are victims of an inequitable tax system and shifting would make the tax system fairer.

Because farmers are major payers of the real estate taxes, they would be major beneficiaries of a repeal. So the question is: Are farmers unfairly treated by current real estate taxes? Currently, farm homes and buildings are exempt from the property tax. Farmland is assessed on the basis of a productivity formula that ends up with a tax that is 50 percent of what other taxpayers pay on their property. Finally, farmers benefit from the services provided by local governments funded by their real estate taxes. Acknowledging these benefits, farmers are not likely to come over the hills with pitchforks to support this proposal.

3) Replacement of a locally controlled tax with state-controlled taxes will diminish the authority of local governments. With the funding mechanism left to the Legislature, replacement revenue would be determined by the state, and local governments would have less say about financing their services.

4) The state government has already reduced the property tax burden by providing income tax credits and feeding new money into school funding.

5) The real estate tax serves a number of legitimate purposes in our tax system. It serves as an income tax on the appreciation of land, a gain in wealth that cannot be recovered under the liberal provisions of estate taxes. It forces owners to keep property in its most productive use – no cornfields assessed as farmland while owners hold the land for speculation. It is a stable form of revenue that protects schools, townships, counties and cities from the vagaries of the economy.

Even though a majority of us dislike the property tax, this proposal will be defeated because, in the final analysis, voters will recognize the pitfalls involved in such a radical change.


Omdahl is a former North Dakota lieutenant governor and a retired University of North Dakota political science teacher.