North Dakota Property Tax Relief Probably Won’t Last

Property-Tax-Bill-Appeal

The North Dakota state government’s approach to property tax relief, under Governors John Hoeven and Jack Dalrymple, has been to hide soaring local spending in state budget surpluses through buy-downs of that spending. Cumulatively, the state has bought down $1.5 billion in local spending. But don’t take my word for it. Governor Dalrymple himself used that figure in a recent op/ed:

“Since 2009, the North Dakota Legislature has provided about $1.5 billion in property tax relief as part of an unprecedented $2.4 billion tax relief package,” he wrote. “In the current biennium alone, North Dakotans will benefit from more than $850 million in property tax relief, including about $656 million provided through a new K-12 school funding formula that shifted the largest share of education costs from school districts to the state.”

The key word in that last sentence is “shifted.” The spending obligations didn’t go away. We taxpayers are still footing the bill. Only, we’re paying for it through state taxes instead of local taxes, and we’re not feeling the pain because at the state level coffers are stuffed full with oil-driven revenues. One day, though, that might not be the case, at which point the decision to shift all this spending to the state level might come home to roost in the form of higher state taxes to meet these obligations.

But, for better or worse, these property tax buy-downs are what we’re doing. But in a letter to the Grand Forks Herald, Rep. Mike Nathe points out that not all local governments are passing along the buy-down to citizens in the form of lower taxes:

As was our intention, a majority of schools districts have passed along most of the increase in state school funding to property owners in the form of tax relief. For example, as a result of the new education funding, Bismarck cut their property taxes 19 percent, Fargo 25 percent, Minot 25 percent, Linton 26 percent, Oakes 26 percent, Stanley 26 percent and Harvey cut 24 percent just to name a few. I applaud the school districts that provided significant tax relief to their property owners for doing the right thing.

Unfortunately, you can’t say the same for many of the city, county and park districts in North Dakota. Over the last four years, the state has sent property tax relief funding to local governments only to see many of these local governments use state funded tax relief funding to increase local spending instead of providing tax relief.

In 2013, the state funded an additional 12 percent property tax reduction for cities, counties and park districts on top of the new education funding. Unfortunately, again many city, county and park governments used the 12 intended for tax relief to fund increased spending. Don’t take my word for it, all you have to do is look on your property tax statement and you will see what I am talking about.

As a legislator, this outcome is extremely frustrating to see.

It’s extremely frustrating to taxpayers too, no doubt, but I’d point out that even in places that have lowered property taxes after the latest state buy-down – distinct from previous buy-downs in that it is an on-going obligation for the state – local officials are trying to convince voters to increase spending anyway. Minot voters, for instance, had a school bond issue before them that would have raised property taxes on the average home by hundreds of dollars per year. It failed, but it’s hard to imagine the school district even attempting an “ask” that large absent the legislature’s buy-down of property taxes.

Which is another reason why the legislature’s property tax efforts are doing more harm than good. Not only is the tax burden simply being shifted from local to state, but that shift clears the way for even more local spending. Granted, things like school bonds still have to be approved by voters, but other spending increases don’t. And you can bet with billions in tax burdens hidden in state budgets, in the coming years spend-happy locals will take advantage.

Some North Dakotans – but not all as Rep. Nathe points out – will be enjoying local property taxes in the short-term. But that enjoyment will be fleeting as there’s been nothing done to rein in future increases.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • kevindf

    The stage is being set for sky high income and property taxes for everyone in the private sector in this state!

    • John_Wayne_American

      sky high income tax? state? how do you see that???? You really need and accountant, your TurboTax 2003 is letting you down..

      • kevindf

        Cory Fong called me and admitted I pay more in ND income taxes than Federal income taxes because of what was done in the last two sessions of the legislature. I know for I fact I’m not the only one.

        • ec99

          Kevin, you have proclaimed this for years, without ever explaining the why of it. I long ago speculated it was due to the fact the Federal Govt. accepted deductions which the state wouldn’t. What those would be, I don’t know. But given the fact that most of us owe thousands more to the Feds, than to the state, I would surmise that what the IRS doesn’t collect from you more than makes up for what Bismarck gets.

          • kevindf

            Why would a state that claims to be so prosperous need to tax anyone’s income more than the entire federal government does?

    • tomorrowclear

      For God’s sake, would someone cut Kev’s oppressive taxes, already!

    • Tim

      Kevin,
      Unless you are willing to share the details, your argument is falling on deaf ears and no one any longer believes your lies. After asking several times for details which you fail to provide, I suspect you are either lying or not paying your share of federal taxes and are one of those with handouts – you get a hand out from the federal and expect the state to do the same.

      There are several reasons for this possibly, it could be due the fact that you are paying 0% tax on the federal side on some capital gains (so are you really paying your fair share) and ND makes you pay taxes on 2/3 of those numbers. It could also be due to the fact that you have some credits on your federal return (child tax credit, education credit, savers credit, energy credit, small business tax credit, etc) therefore reducing your overall federal taxes to practically 0 (once again I ask are you paying your fair share on the federal side?).

      Explain to us the reasons rather than just bloviating the same garbage over and over and over again – as referenced below others don’t believe you as well – now true to your responses I expect a personal attack on my post rather an actual response (you have done it before so I won’t be surprised if is happens again).
      Examples would help bolster your claim.

      • kevindf

        In 2007, I had a ND income tax liability of zero. That was before they cooked up their property tax buydown scheme in an attempt to mask the obscene property tax levels. They are either greedy or passing legislation without regard to the consequences.

        • Tim

          So what pushed up your ND tax bill?? I don’t seem to recall anything significant happening and in fact ND rates actually went down. The federal government added some credits and expanded others but ND didn’t do anything significant. I suspect all along you may have qualified for some ND credits such as Renissance Zone credits, Bio-fuel credits and after that 5 year time frame wore off you no longer were getting the credits and you had to become a responsible tax citizen like the rest of us. Also in 2007 & 2008 you got a property tax credit of up to $1,000 on your ND tax to increase your tax refund or lower your bill.

          Still not enough details to believe your lies – why the secrecy, why not tell the truth?? I suspect you just want to be a taker and not someone who helps pay the bills.

          • kevindf

            How long have you been on the government teat, “Tim?”

          • tim

            Can’t win an argument, so you belittle people – I expected nothing less from you. I must have hit a nerve that you are a freeloader!!

          • http://sayanythingblog.com Rob

            I agree with Tim, Kevin. You gripe about your taxes, but whenever anyone asks you for more details, you start insulting people.

            I’m no fan of taxation, but the simple fact of the matter is that income taxes in North Dakota have been coming down.

          • kevindf

            Ask the tax commissioner next time you talk to him how many people pay more in state income taxes than federal income taxes. I’m one of them and will be more than happy to prove it to you.

          • kevindf

            You’re the one hiding under a pseudonym because you are collecting a government check.

        • ec99

          OK Kevin, you claim a higher ND than Fed income tax. I have said that for most of us, it is quite the opposite. So here is what I’m going to do: give you my 2012 taxes:

          Fed 17,732

          State 2,015.

          Now that is more than an 8:1 ratio.

          How yours can anyway be reversed is beyond me.

          • tim

            If you say a lie long enough you begin to believe it.

  • tony_o2

    What’s yout solution? End property taxes and hide 100% of local spending in the state budget?

    • http://sayanythingblog.com Rob

      Either that or get the state out of local property taxes entirely.

      What we have now is a hybrid where taxpayers get the worst of both. We get run-away spending at the local level, with the state absorbing a hefty chunk of it and nothing done to permanently change the trajectory on property taxes.

  • Prairiemom3

    Rep. Nathe is wrong when he says that the majority of school districts have passed the savings along. Wrong. None of us seeing all of the buydown going into our pocketbook. The buy down is $850 million/biennium. Since Mr. Fong told us replacement cost for property tax was $800million we should have seen a 50% reduction in PT. In fact, that’s what Rep. Carlson promised us – that we would all see a 48% savings. So we’re supposed to be happy that we’ve seen a 20–25% reduction? That means that we’re seeing half or more of the buydown going to increased spending. Sorry folks, we got ripped off.

  • Rick Olson

    I have raised this point more than once, so here goes one more time. I think North Dakota should follow South Dakota’s lead and eliminate the income tax altogether. In order to make up the difference, South Dakota places a sales tax on just about everything, including groceries and prescription drugs, both of which are presently exempt from sales tax in North Dakota.

    North Dakota is flush with cash — the state treasury is sitting on some $3 billion (admittedly, most of that money goes to dedicated funds like the Legacy Fund, etc.) — so in reality, North Dakota is flat when it comes to balancing the books.

    That being said, I think North Dakota could very well eliminate the income tax and still come out ahead.

    I really don’t think there is any workable, fiscally responsible means of eliminating the property tax altogether. This is where the lion’s share of local government’s day-to-day operating capital comes from … be it cities, counties, school districts, townships, etc. The basic, essential day-to-day services that the people expect their local governments to provide — are largely financed through property taxes and fees. I am talking things like maintenance of streets, roads, etc. (maintaining the infrastructure), garbage pickup, water and sewer services, fire and police protection, and the litany of other day-to-day services that our cities and counties provide.

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