Back during the 2012 election cycle North Dakota had a bit of a political brawl over the issue of property taxes.
On one side were activists – like Charlene Nelson, my guest today on the radio – who argued that the property tax is inefficient and fundamentally unfair and ought to be abolished.
On the other side were special interest groups ranging from local government associations to the North Dakota Chamber of Commerce who argued that abolishing the property tax would mean a loss of local control and hikes to other taxes such as the sales or income tax.
For their part, state lawmakers stepped in and promised voters that if they killed the ballot measure we’d get property tax relief from the state level. Which we did, of a sort. State officials bought down local property taxes by increasing state spending on K-12 education and straight-up buy downs of local taxes.
Only now the heady days of revenue surpluses are over and the state can’t afford the latter any more. The way things are looking the property tax buy downs will stop after 2017, and that probably means tax hikes at the local level.
In that context, Nelson says there is renewed interest in abolishing property taxes. “The people of North Dakota re ready to push for this again,” she told me, adding that a “couple of dozen people” have contacted her wanting to bring the issue up again.
“They covered it up with the surplus,” Nelson said of the property tax issue in previous years.
“They had no intention of solving this problem,” she continued.
Nelson says that lawmakers have defeated numerous reforms for the way local property taxes are implemented which could have helped ease some of the tension, but did pass reforms to the way property is assessed which, in her opinion, has made things worse.
Lawmakers took “assessments out of the hands of local officials and put them in the hands of out of state companies like Vanguard,” she said.
“Our homes can’t be held hostage by rising spending,” she added.
I supported the push to abolish property taxes back when the state was flush with revenues. What better time to enact major tax reform than a time when the state has the funds on hand to smooth over any short-term wrinkles? My thought was that I’d gladly trade property taxes in for reasonable increases in other taxes.
But how do we implement that kind of reform when the state doesn’t have revenue surpluses? When the state is grappling with major budget shortfalls?
I asked Nelson about that, and she argued that the losses in revenues could be made up by additional tax revenues from economic growth spurred by the lack a property tax. Which sounds nice and all but even if we stipulate that there a) would be a resulting increase in revenues and that b) it would be enough to cover the bulk of losses from abolishing the property tax how do we bridge the gap?
Because surely abolishing property taxes isn’t just going to turn on new revenues like a light switch. Such a shift would take time.
I’m not sure Nelson had a good answer, but please do listen to her explanation:
Here’s the full interview: