Rep. Al Carlson, Published December 18 2013
Letter: Property tax rate is localAt this time of year, when property owners have received their property tax statement, it becomes a major topic of discussion. The property tax system is full of complexities, but it must be noted that there are only three primary factors that determine your tax bill. The first primary factor is the value of your property, which is determined through the assessment process. The assessment does not determine your tax bill; it determines your property’s relative share of the amount of taxes imposed by the school district, city, county, park board or other taxing districts. Accurate and current assessments ensure the property tax burden is distributed as fairly as possible among taxable property.
The second primary factor is the tax rate. That is determined by the school board, county commission, city commission, or other governing body based upon its spending plans for the upcoming year. That amount is divided by the combined taxable value of all property in the taxing district. The resulting percentage is the tax rate, or mill rate, that is applied to the taxable value of each property in the taxing district.
Herein lies the “fly in the ointment.” An increase in your assessment does not have to translate into an increase in your taxes. Your tax increase is entirely within the control of the people elected to represent you in your local political subdivisions. When you hear local officials say they reduced your mill rate, don’t assume that means your taxes will decrease. If your assessment has increased by a greater percentage than the mill rate is reduced, you will likely pay more taxes. Citizen involvement in political subdivision budgeting is crucial to keeping a handle on increased spending.
The third factor is the property tax relief provided by the Legislature. The Legislature has stepped up to help you with your property tax bill. Remember, property tax is a local tax, one the state neither can assess nor collect. In the past three sessions, the Legislature has provided $1.6 billion in direct reductions. The state-funded property tax relief came by providing more funding to education in the form of a mill levy buy-down, which in turn was to be passed onto the property owners. In the 2011-13 biennium, the mill levy reduction grants totaled $341.8 million. In 2013-15, that number was increased by
$314.7 million to a total of
$656.5 million. This increased the level of state funding for K-12 to more than 83 percent. This was intended to lower property taxes by 19 percent.
Also, the state included a 12 percent state-paid credit to be directly applied to your property tax bill. This percentage amounted to another $200 million in relief.
To summarize, the property relief package totaled $856.5 million. On a dollar-for-dollar basis, this should have equated to a 31 percent reduction in your property taxes. Look at your statement. Figure it out. Did you get your 31 percent reduction?
Here are a few ideas:
- Establish a budgeting process where dollars and percentages are used instead of mills.
- Freeze values of properties at a certain date.
- Adopt zero-based budgeting where everything starts with last year’s level of spending.
- Budgets that increase by more than a certain percentage would require a vote by the citizens.
- Use three-year averages on assessed values to help with rapid increases in valuation.
- The state assumes certain programs that are required to be provided by the counties. (Taxpayers must get dollar-for-dollar reduction of taxes if this happens.)
Some of these steps fly in the face of local control, something not to be given away lightly. But once again, the key to reform is not only some of these suggestions but also a greater involvement in the process by those paying the tax bill.
Carlson, R-Fargo, is majority leader of the North Dakota House of Representatives.