The initiative, called Measure 2, had been proposed, according to the Williston [N.D.] Herald, by a tax reform group called “Empower the Taxpayer 2010.”
The anti-property-tax move is one of many that have recently sprung up around the country, including the introduction of HB 1776, the Property Tax Independence Act, in Pennsylvania, and the move to end property taxes in Texas by Debra Medina, a Republican candidate for governor two years ago.
Property taxes are generally levied by local cities and municipalities as a source of funding for school districts. As such, property taxes are levied in every state in America, though some states maintain more control over their local tax districts than others.
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According to the Herald, in 2010, 45% of North Dakota’s property taxes went towards education funding, and another 30% went towards criminal justice and other county services.
In 1994, a Michigan initiative called “Proposal A” moved much of the responsibility for funding education from localities to the state, resulting in a drop in residential property taxes and an increase in sales taxes, among other sources of funding.
Proposals for replacing the revenue from property taxes have included increasing state sales taxes; an increase in state income tax, as in Pennsylvania; and a tax on oil revenue, as in North Dakota, America’s second-largest oil producer.
One of the arguments made by property tax-elimination proponents is that the existence of property taxes, which can be variable, leaves homeowners in the status of “renters” who cannot escape their long-term obligations to government, or even fully plan for the scope of the liabilities. Such groups raise the spectre of citizens losing their homes to foreclosure for failure to pay property taxes. (Pennsylvania state representative Jim Cox, a backer of HB 1776, was quoted by The New York Times arguing that “no tax should have the power to leave you homeless.”)
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This argument, of course, neglects to acknowledge that a citizen could just as easily be forced to sell his or her home to pay escalating income or sales tax bills.
The Tax Foundation, a tax research group based in Washington, D.C., indicates that in 2009, property tax burdens ranged from 1.89% of a home’s value in New Jersey, the state with the heaviest property taxes, to 0.18% in Louisiana, the state with the lowest. North Dakota ranked tenth on that list in terms of property taxes as a percentage of house value, with annual taxes running at 1.42% of house value.
North Dakota raises more than $800 million a year, nearly a quarter of its revenue, from property taxes. Prominent politicians, such as Jack Dalrymple, the state’s Republican Governor, had previously stated their opposition to the repeal. “It wasn’t that I didn’t think we couldn’t afford the change, it’s that I don’t want my district controlled by Bismarck and some group of legislators,” said Joe Miller, a Republican State Senator who is the Vice-Chairman of the state’s Finance and Taxation committee. “I want to be able to control that myself. My Republican philosophy is that the best government is the one closest to the people.”
Even with the ringing defeat of the repeal attempt in North Dakota, you haven’t heard the last about abolishing property taxes. For one, local districts need the money. A report from the Pew Charitable Trusts’ American Cities Project, released at the beginning of this month, indicates that property tax collections dropped by 3.1% nationally in 2011, following a drop of 2.5% in 2009. The lower revenue is tied to the decline in real estate prices tied to the housing crash, and is expected to continue this year and next, according to the nonpartisan policy group.