North Dakota’s new governor has outlined a plan he said could eventually eliminate property taxes in the state.
During his first State of the State address on Jan. 7, Gov. Kelly Armstrong—in office since Dec. 15—told lawmakers that the state has accumulated enough revenue from oil production taxes in the state’s Legacy Fund to offer tax relief to most of North Dakota’s homeowners.
Armstrong said that if the legislature approves, property tax relief will come courtesy of HB 1176, introduced in the state House of Representatives on Jan. 7.
Joe Morrissette, director of the Office of Management and Budget for North Dakota, said voters have been concerned about property tax increases.
“It’s been kind of a percolating issue,” he told The Epoch Times. “I feel like elected officials feel there’s a mandate.”
Under HB 1176, the tax credit for a primary residence would increase from $500 to $1,550 for the 2025 to 2027 biennium, and to at least $2,000 for 2027 to 2029. Covering the property tax shortfall would cost the state’s general fund $310 million, with the remainder covered by the Legacy Fund, Armstrong said.
The credit will apply to all primary residences valued at or below North Dakota’s median home price of about $270,000. Second homes, rental properties, commercial properties, and other non-residential properties don’t qualify.
When the Legacy Fund revenue stream is large enough to support a tax credit greater than $2,000, the excess cash will be split evenly between tax relief and decreasing the general fund expense, the proposal says.
The plan caps property tax increases at 3 percent annually.
“Combined with the expanded Homestead Tax Credit, the initial $1,550 will eliminate property taxes for an entire class of homeowners who need it the most. And it will put the bulk of primary residences on a path to zero (property tax) within the next decade,” Armstrong told the Legislature.
Morrissette said that the oil boom that hit the state around 2006 brought prosperity, financial security, and jobs for many people. However, it also increased property values, which resulted in higher property taxes.
North Dakota’s main industries are energy and agriculture, both of which can be very unpredictable, Morrissette said. Voters approved the Legacy Fund in 2010 to establish a steady revenue stream from oil production.
Several local officials wrote that they supported the idea of property tax reform. However, a general cap on property tax increases could hamper their ability to provide public services.
“A taxing limitation calculation that considers the rate of inflation, population growth, economic growth, and new service demands, in addition to new taxable property development, would assist in providing a viable path of sustainability for taxing entities while maintaining fiscal restraint,” Tony Grindberg, a Cass County Commissioner, stated in his written testimony.
The sticking point appears to be how to reform property taxes without disrupting public services. Last November, voters rejected a plan to eliminate property taxes that are based on a property’s assessed value.
Supporters of Measure 4 said taxing private property is unfair and objected to what the measure’s sponsor termed “wasteful, unnecessary spending.”
“Private property is the foundation of a free society. The ability for the government to take away something that you should rightfully own is improper,” Rep. Rick Becker, Measure 4 sponsor, was quoted as saying.
Opponents of Measure 4, mainly public officials and tax-funded organizations, warned that eliminating property taxes could disrupt public services. Keep it Local, a group that campaigned against the measure, stated on its website that supporters had no solid plan for replacing the lost revenue.
“There is no well-vetted plan to make up the estimated $1.329 billion per year to cover property taxes to fund essential services,” the website stated.
