Measure 2 would help landowners living out of stateOne of the most contentious initiated measures in recent state history will be decided on June 12 by North Dakota’s residents. Measure 2 would amend the state Constitution to abolish property taxes if a majority votes in its favor.
By: Brian Willhide, The Jamestown Sun
One of the most contentious initiated measures in recent state history will be decided on June 12 by North Dakota’s residents.
Measure 2 would amend the state Constitution to abolish property taxes if a majority votes in its favor.
Property tax is currently levied on all real property in the state, whether residential, commercial or agricultural, according to Cory Fong, North Dakota tax commissioner.
Real property, also known as immovable property, is any land that has been improved by human efforts, and includes things such as a buildings and roads.
The other subunit of the term “property” is personal property, which is moveable and refers to items such as furniture, clothing, household goods, etc. Personal property has not been taxed in North Dakota since the 1960s, Fong said.
“Property taxes are paid by property owners to their respective county government,” Fong said. “The county then distributes that tax revenue to cities, townships, school districts and other taxing districts.”
If passed, the measure would then require the North Dakota Legislature to replace revenues lost from property taxes.
Of the more than $759 million in property taxes levied in the state in 2011, 16.7 percent ($126.8 million) came from out-of-state property owners who do not permanently reside in North Dakota but have land, a business or a temporary home in the state. Those are likely conservative totals, according to Terry Traynor, assistant director of policy and programs with the North Dakota Association of Counties, which evaluated those totals as part of a statewide survey.
“We feel pretty comfortable that those are a bit of an underestimate of the exact figures,” Traynor said.
If passed, out-of-state property owners would no longer have to pay such property taxes.
However, Fong said it’s not as though out-of-state property owners would not be taxed at all.
“The notion that they won’t pay any taxes is inaccurate,” Fong said. “They are still subject to sales tax on anything they purchase in the state and are subject to income tax for any income their enterprise here in North Dakota generates.”
Fong acknowledged that the amount of sales and income taxes paid by out-of-state property owners is a “small percentage” compared to what they pay in property taxes. Property taxes did account for the highest portion of tax dollars collected in the state in 2011 at nearly 38 percent, with sales and use taxes second at nearly 36 percent and income taxes third at almost 27 percent.
In Stutsman County alone, 17.6 percent of the $23.4 million of all property taxes levied in 2011 — $4.1 million — was from out-of-state property owners.
Of the nearly 21,000 pieces of property in Stutsman County, about 11 percent (2,322 total) are registered to out-of-state property owners, according to Traynor. That would include individuals who live in a surrounding state such as Montana, South Dakota or Minnesota and have land here they use during hunting season, or corporations that have headquarters outside of North Dakota but a number of establishments located inside the state.
If passed, Measure 2 would provide a benefit for additional out-of-staters who may be looking to purchase land in North Dakota, Traynor said.
“If you look at the measure, it creates a greater incentive to buy land in North Dakota,” he said. “For instance, someone from Minnesota who is in between buying something in South Dakota or here in the state may be more willing to buy here.”
Stutsman County Auditor and Chief Operating Officer Casey Bradley said that may not necessarily be the case.
“You could argue that point either way as far as I’m concerned,” he said. “While, yes, an out-of-state land owner wouldn’t be paying property taxes, there’s no telling what will happen to that land value over time.”
Bradley said that the consequences of passing Measure 2 are mere speculation at this point because it would be something unprecedented.
“Property taxes have never been eliminated before, so we don’t know exactly how the Legislature will deal with it and we don’t know exactly what will happen to the price of some land,” he said.
Sun reporter Brian Willhide can be reached at 701-952-8454 or by email at email@example.com