North Dakota voters may end most property taxes. Government programs could face huge cuts
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North Dakota voters this fall could largely end property taxes by approving a ballot measure that opponents say would drastically slash a variety of state services but supporters argue would provide long-sought relief the state can afford.
If passed, the constitutional initiative would eliminate property taxes based on assessed value and require the Republican-controlled Legislature to replace the lost revenue. A top legislative panel estimated that total cost to be $3.15 billion every two years — a huge number for a state that passed a $6.1 billion, two-year general fund budget in 2023.
Opponents wonder what government services and initiatives would be cut to cover the replacement revenue.
“It would be absolute chaos for the Legislature and for the appropriations process, something that we've never done before," said longtime state Rep. Mike Nathe, a Republican on the House’s budget-writing panel. "We'll be walking blind, that's for sure, as far as how to go about doing this.”
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Money for Medicaid expansion, hospitals, nursing homes and education programs could all be on the chopping block, he said. Money for infrastructure projects would also be at risk, Republican House Appropriations Committee Chairman Don Vigesaa said. The Legislature also may have to cut state agencies' budgets and employees, he said.
Measure leader Rick Becker countered that it wasn't practical to identify funding sources in the initiative but that the state has plenty of money to fill any gaps. He said the Legislature could use earnings from the state’s $11 billion oil tax savings as well as millions of dollars he said go to “corporate welfare” for private corporations and special interest groups. The state also has better-than-forecasted revenues coming in, he said.
“We are such a rich state per capita that we can actually make this conversion and be able to afford it without increasing taxes and without cutting services," said Becker, a former Republican state representative.
More than 100 organizations encompassing agricultural, energy, education, health care and other groups formed the Keep It Local coalition to oppose the measure. Chairman Chad Oban described the initiative as taking a sledgehammer to an issue that merits a more thoughtful approach.
A similar measure failed handily in 2012. Oban said he expects a closer vote margin due to more frustration and political changes in North Dakota since 2012, but added he is confident voters will defeat the measure.
The measure would set the replacement revenue from the state at the amount of property taxes levied in 2024, but Oban said tax revenue would need to increase in coming years.
To deal with that, Becker said local governments could tax property in other ways because the measure abolishes only assessed-value taxation on property. Becker has suggested cities could enact an infrastructure maintenance fee partly based on road frontage, giving local governments a means to raise revenue beyond what the state would replace.
The Legislature could increase income and sales taxes, come up with new or never-before-considered fees, or allow local governments to tax in different ways, Oban said. Sales tax increases might help major cities such as Bismarck and Fargo, but it wouldn't work for rural communities that don't have a sales tax base to pay for their schools and law enforcement moving forward, he said.
Property taxes make up about $45 million or one-third of the city of Fargo's budget, and about 40 percent of the budget is dedicated to police and fire services, Mayor Tim Mahoney said. North Dakota's largest city has nearly 200 police officers and 150 firefighters, and it needs to offer competitive pay to retain employees and attract new hires, he said.
“Even cost of living or things like that that happen every year, in order to stay competitive, if you have a fixed amount of money coming in, you have to make up for that somewhere, and that's not an easy fix,” Mahoney said.
Last year, the Legislature passed a package of income tax cuts and property tax credits estimated at $515 million. The state has a glowing financial picture, including strong oil and sales tax revenues.
The bulk of the measure would take effect Jan. 1, 2025, if passed.
