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It is true: the property tax is unfair

By Staff | Feb 26, 2010

A group of angry citizens, “Empower the Taxpayer,” has embarked on a crusade to initiate a measure for a vote of the people on the question of repealing all property taxes in North Dakota. They claim that the property tax is unfair. They are absolutely right.

The property tax is supposed to be levied according to value but defining and establishing value in many parts of North Dakota is not easy. Sometimes it is impossible.

Let’s start with farm property. As our contribution to saving rural America, North Dakota does not tax buildings and homes on farms owned by real farmers. Some city folks think that is unfair. Then in order to reduce taxes on the rest of the farm property, the legislature cooked up an assessment system based on productivity.

This system results in significant differences from one township to the next, a frequent irritant to the farmers on the high side of the township line. They think it is unfair. However, it accomplished what its sponsors intended. Farmland is taxed at half the value of property in urban areas. Some nonfarmers think that is unfair.

Then there are the small towns where homes have no market value. Take my home town of Conway, population 19 and declining. An assessor can go into Conway with the three basic methods for determining value income, cost and market and none of them will work.

Nobody is buying and selling homes in small towns. Consequently, homes have no value in Conway. The assessment gets to be “by gosh, by golly.” Build a new house in a dying town and the value declines 90 per cent before opening the garage door. If any homes in the state are being over-assessed, they are in dying towns. Folks in small towns think that is unfair.

The story is different in major cities where professional appraisers have honed their assessing skills. According to market studies conducted by the property tax division of the State Tax Department, valuations in major cities are very accurate. Some city folks think that is unfair.

Empower the Taxpayer has been claiming that as much as 40 per cent of the taxable businesses and homes are not being taxed in some jurisdictions. That is not true anywhere in the state. With hungry local governing boards authorized to add missed property after the assessor is done, there is no chance that parcels of property are being missed.

The state government gets nothing from the property tax. Half of the tax goes for schools; one-fifth for counties; around one-fourth for cities, and the rest for townships and a variety of special districts. Many of these local governments, especially school districts, would collapse without property tax revenue.

The sponsors of this initiative are pretty cavalier about finding new revenue for local governments. They suggest taking money from other taxes and cutting more budgets to replace the $700 million lost. That’s pie in the sky. There isn’t that kind of loose change in the system.

It would take a book as fat as War and Peace to enumerate the many evils of the property tax but we live with it because we can’t live without it. That’s about the only reason.

Omdahl is a UND professor emeritus in political science and a former lieutenant governor of North Dakota.

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