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Published May 09 2011

Omdahl: Property tax not so simple

Petitioners have filed a proposal with the secretary of state to repeal all property taxes in North Dakota and to replace these locally collected taxes with revenue collected at the state level. Residents will vote on the measure in the 2012 primary election.

Under the measure, the Legislature will be required to replace the lost revenue with state-collected taxes. Since the measure mandates replacement of the lost revenue, it is not designed to cut taxes but to shift them from the current payers to different payers.

As we discovered when we eliminated the personal property tax on farm equipment, store inventories and household goods, getting money back to the school districts, counties, cities and townships proved to be almost impossible – and personal property constituted only 15 percent of the total property tax at the time.

If the proposed measure intends that all local governments continue to receive the same amount of revenue from the state as they did from local property taxes, then the Legislature will have to develop a formula tailored to each political subdivision because local governments have a variety of local options. Consequently, every school district, county, city and township has a different mixture of programs and mill levies.

Burleigh and Cass counties have a different set of levies than Williams and Stark. Under current law, counties have around 40 different levies they may or may not use. Among them are levies for such programs as roads, veterans’ services, extension work, planning, advertising, emergency medical, weed control, senior citizens, job development, fairs and parks. Each county levies a different amount for each service within limits set by the Legislature.

The same is true for cities. Under state law, cities may or may not levy for streets, libraries, fire protection, the arts, police and firemen’s retirement, armories, advertising, public transportation, job development, animal shelters, city bands and a score of other programs.

School districts may levy for special education, renting space, cooperative education, school buses, kindergarten, long-distance learning, school buildings and more. Townships may levy for roads and bridges, weed control, rural ambulance, firefighting equipment, pest control, weather modification and several others.

With each local government using property taxes in its own way, the Legislature will be required to come up with a payback plan that will fit each of the 2000 local governments using property taxes. If instead it passes a “one-size-fits-all” formula, many local governments will get less than they now raise, and many will get more.

Local governments could be given exactly what they are now raising. That may work for a year or two, but freezing the payback would not meet the changing needs of local governments. At the same time, local governments would be prevented from adopting any new options because they will have no access to revenue.

A major function of counties and townships is the maintenance of a road system. Perhaps they are levying only half of the authorized level when this constitutional amendment passes. A wet spring may cause serious damage to the roads, and there is a need for increasing the levy for highways. But there can be no response locally because the state has the money. In fact, this will be true for all local government services.

Abolishing the property tax is simple, but replacement is the hard part.


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