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Dale Wetzel, Associated Press, Published August 01 2012

UPDATED: ND lawmakers review proposed property tax cuts

BISMARCK, N.D. — Weeks after North Dakota voters thrashed a proposal to abolish all property taxes, state lawmakers are mulling ideas to cut residential property taxes and restrict local governments’ ability to dole out tax breaks.

Some proposals would apply property taxes to farm homes, which are now exempt, while extending a partial exemption to any North Dakota residence if the owner uses it as his or her primary home.

One bill would give a partial property tax exemption to North Dakota homeowners who are at least 65 years old. Another would distribute state “block grants” to counties to finance local property tax cuts.

Each of the proposed bills would require the Legislature to replace the money that local governments would lose from state-ordered property tax exemptions, an expense that would exceed $350 million over two years. The proposed exemptions would affect only homes; commercial and farm land would not be included.

The Legislature's interim Taxation Committee, which is reviewing more than a dozen tax bills, should begin deciding on its favorites in early September, said its chairman, Sen. David Hogue, R-Minot. The panel has authority to introduce bills in the 2013 Legislature.

The Legislature has long been preoccupied with property taxes, but a proposed constitutional amendment to abolish them sharpened the focus this spring. The amendment was overwhelmingly defeated, with 77 percent of voters opposed. Critics of the measure said it would weaken the ability of local governments to set their own spending priorities.

For the new round of suggested legislation, a popular approach is to exempt part of a home's market value from property taxes.

One bill offers a maximum property tax exemption of $80,000 of a home's market value. For homes worth less, the break would be capped at 80 percent of its value.

The same bill would replace an existing tax exemption on farm homes with one covering up to $75,000 of each home's value. The new exemption should ensure that most rural North Dakota farm homes would not be taxed, legislators said.

The measure would require legislators to distribute $371 million to local governments over two years to make up for the lost revenue.

Other bills offer a $125,000 exemption for North Dakota homeowners who are at least 65 years old, and a $75,000 exemption for those who are younger.

Sen. Dwight Cook, R-Mandan, wondered whether it was justified to offer older homeowners a larger exemption.

“Property tax places a burden on everybody,” Cook said. “I know a lot of young families, buying their home for the first time, they're raising kids, they've got them in school, and trust me, property tax is a burden on them, too.”

Homeowners would have to fill out a form each year attesting that they were eligible for the tax breaks, a provision that county tax administrators said would be a logistical nightmare.

“There is going to be some pushback from the taxpayer,” predicted Kevin Ternes, the Minot city assessor. “It's really, really, really difficult to get forms back from people, even when you're trying to provide them tax relief.”

Not all of the bills being considered would cut property taxes. One would eliminate the ability of local governments to offer any property tax exemptions, which they use to give breaks to businesses and other favored groups. It also would abolish “renaissance zones” that several cities use to encourage downtown development.

No legislator spoke up Wednesday in favor of the wholesale abolition of property tax incentives.

Rep. Mike Nathe, R-Bismarck, said he wanted to retain an incentive for child care centers, saying it is needed to help encourage the creation of new ones in the oil patch.

“I think that would still be a very useful tool for communities out west that are growing,” Nathe said.


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