North Dakota voters could largely end property taxes this fall by approving a ballot measure that opponents say would drastically cut 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 make up for lost revenue. A leading legislative panel estimated the total cost at $3.15 billion per two years — a huge sum for a state that passed a two-year general budget of $6.1 billion in 2023.
Opponents wonder which government services and initiatives would be cut to cover the replacement revenues.
“It would be absolute chaos for the Legislature and for the appropriations process, something we’ve never done before,” said Mike Nathe, a longtime Republican on the House budget panel. “We’re going to be walking blind, that’s for sure, as far as how to do this.”
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, said Don Vigesa, speaker of the Republican House of Representatives. The Legislature may also have to make cuts to state agencies’ budgets and staff, he said.
Measure leader Rick Becker countered that it wasn’t practical to identify funding sources in the initiative, but that the state has enough money to fill any gaps. He said the Legislature could use revenue from the state’s $11 billion oil tax savings, as well as the millions of dollars he said would go to “corporate welfare” for private companies and special interest groups. The state also has better-than-expected revenues, he said.
“We are such a wealthy state per capita that we can actually make this transition and afford it without raising taxes and without cutting services,” said Becker, a former Republican state representative.
More than a hundred organizations from agriculture, energy, education, health care and other groups formed the Keep It Local coalition to oppose the measure. Chairman Chad Oban described the initiative as a sledgehammer on an issue that deserves a more thoughtful approach.
A similar measure failed in 2012. Oban said he expects a larger vote margin because of 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 state’s replacement revenue at the amount of property taxes collected in 2024, but Oban said tax revenues should increase in coming years.
To deal with that, Becker said local governments could tax property in other ways, because the measure only eliminates property taxes. Becker has suggested that cities could introduce an infrastructure maintenance fee based in part on road frontage, giving local governments a means to generate revenue beyond what the state would replace.
The Legislature could raise 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 could help big cities like 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, he said.
Property taxes make up about $45 million, or a third, of the city of Fargo’s budget, and about 40% of the budget goes to police and fire, Mayor Tim Mahoney said. North Dakota’s largest city has nearly 200 police officers and 150 firefighters, and must offer competitive pay to retain employees and attract new hires, he said.
“Even the cost of living or things like that happen every year. To stay competitive, if you have a lump sum coming in, you have to make up for it somewhere, and that’s not an easy solution,” Mahoney said. .
Last year, the Legislature approved 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.
Most of the measure would come into effect on January 1, 2025 if passed.
