Republicans Blundered By Passing Property Tax Relief Which Never Really Was Tax Relief


TOM STROMME.Tribune Governor Jack Dalrymple, right, along with members of the Governor's Task Force For Property Tax Reform and the legislature announced a final tax cut relief package totaling $400 million in income and property taxes for the people of North Dakota on Tuesday morning in the state capitol in Bismarck. In back from left are Rep. Mark Owens (R-Grand Forks), Sen. Dwight Cook (R-Mandan), Tax Commissioner Ryan Rauschenberger, Sen. Jessica Unruh (R-Beulah) and Rep. Craig Headland (R-Montpelier).

There may be no issue in North Dakota that is more persistent, from one political cycle to the next, than angst over property taxes.

Now Republicans, who tried to appease that tax by buying down local property taxes with revenue surpluses at the state level, are in a real pickle on the issue. Because they’ve badly mishandled it.

You see, using statewide funds to replace local property taxes was never really tax relief. It was just a transfer of spending obligations from the local level to the state budget. And while that can have the appearance of tax relief in the short run, when you’ve got a flood of revenues in the state budget in which to hide the local spending, it begins to look like something else entirely when those dollars dry up.

Democrats are now pointing out that the state’s obligation to on-going property tax buy downs is going to be a budget headache given falling revenues, as this John Hageman article illustrates, though the Democrats are conveniently forgetting their own support for this scheme.

The quandary is that if the Legislature cuts some of the local spending they put in the state budget, calling it “property tax relief,” then the decision at the local level will be to either cut services or raise taxes. But if the Legislature perpetuates the property tax buy downs, then it’s going to put upward pressure on statewide taxes, as state Representative and Democratic gubernatorial candidate Marvin Nelson points out:

“The easy thing for the Legislature to do is to not raise taxes and push the responsibility to the local level, and force the local level to pay for it,” Nelson said. “Without a substantial raise in state taxes, one that I don’t think is going to happen, it’s almost impossible that we would not have a substantial increase in property taxes.”

This isn’t about ideology or tax policy philosophy. This is about math.

During a boom in statewide revenues our Republican legislature, and Republican governors, tried to lower local property taxes by transferring local spending into the state budget. Now the boom is over, and the bill is due, and something has to give.

Either lawmakers raise taxes, or they cut the state budget to accommodate the local spending. Or they give up on the property tax buy downs, in which case local governments across the state are either going to cut services or raise taxes. Probably some combination of both.

Complicating the issue is that many local governments used the Legislature’s decision to buy up some of their spending to back fill their budgets with more spending. Meaning that in some parts of the state very little property tax relief reached property owners.

Now those property owners may be in for a double whammy. If the Legislature can’t continue to fund the local spending they bought up, local property owners are going to pay for it again. Plus all the new spending local leaders back filled during the “property tax relief” buy downs.

It’s a complicated, ugly problem with no really good solution to it. And to the extent that Republican gubernatorial candidate Doug Burgum’s campaign against the “establishment” and status quo in North Dakota has gotten traction with voters, this sort of boondoggle is why.