N.D. officials: Keep property taxA proposal to abolish North Dakota property taxes could deprive the state and local governments of taxes on oil, coal, electric power and telecommunications, because the payments are intended as replacements for property taxes, a county official told lawmakers Wednesday.
By: By Dale Wetzel, The Associated Press, The Jamestown Sun
BISMARCK — A proposal to abolish North Dakota property taxes could deprive the state and local governments of taxes on oil, coal, electric power and telecommunications, because the payments are intended as replacements for property taxes, a county official told lawmakers Wednesday.
North Dakota voters will decide the ballot initiative in June 2012. It is a constitutional amendment that prohibits property taxes and directs the Legislature to come up with a method of replacing the lost revenue.
Local governments levied $733.8 million in property taxes in 2010, the state Tax Department said.
Mark Johnson, director of the North Dakota Association of Counties, told a legislative committee Wednesday that the measure would put a legal cloud over other types of taxes that are intended as property tax substitutes.
For example, North Dakota’s 5 percent oil production tax, which is assessed against the oil’s value, and the state’s severance tax on every ton of mined coal are both intended as substitute for property taxes on the value of the minerals, according to Tax Department data.
Johnson said if North Dakota voters decide to abolish property taxes, the justification for collecting other types of taxes that are intended as property tax substitutes becomes questionable.
Federal agencies that now make payments to substitute for property taxes on their land holdings may no longer feel obliged to do so, he said.
Two sponsors of the initiative, Charlene Nelson, of Casselton, and Robert Hale, of Minot, said the Legislature could remedy the tax questions by specifying that some types of taxes are not based on their property value.
Nelson said state and local governments have plenty of tax options, including taxes on sales and income, to replace property taxes. An annual property tax can force a person to sell his or her home if it becomes too large to afford, even if the home’s mortgage is paid, Nelson said.
“My concern is, when I have my house paid off, I want to keep it,” she said. “I don’t want to be forced into an apartment because I can no longer afford this ever-increasing property tax, that has become so unmanageable for my family budget.”
Hale said abolishing North Dakota’s property taxes would make the state a more attractive business location, and would increase the state’s income and sales tax collections when property owners spent the money they saved.
“This would remove the property tax disincentive across the state,” Hale said. “I believe that we would see many industries taking a very, very serious look at this state as a place to settle.”
The legislative committee, which is headed by the North Dakota House’s speaker, Rep. David “Skip” Drovdal, R-Arnegard, will be holding additional meetings to review the amendment and gather information to answer lawmakers’ questions about it. Drovdal said the panel will produce a report in advance of the June 2012 election.
Lawmakers quizzed Hale and Nelson closely about the potential consequences of the measure, hinting that it could force statewide taxes to increase, strip authority from local officials and make it more difficult for governing boards to finance projects.
Local governments would be at the mercy of the Legislature for money, and the amendment is unclear about what state lawmakers are required to finance, said Sen. Ron Sorvaag, R-Fargo.
“How do you feel that this is really giving the locals control? Because no matter how they get to spend it, the Legislature has the deposit ticket,” Sorvaag told Hale. “If you need to spend a buck, but we only give you 50 cents, that’s not local control. That’s not local decision-making.”
Johnson said it would be “a yeoman’s responsibility” to attempt to craft a replacement revenue system if property taxes were abolished.
“I don’t think I’d want to be a legislator,” Johnson said, “and I don’t think I’d want to be a county commissioner.”