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Repeal proposal worse than the property tax itself

By Staff | Nov 11, 2011

On November 3, a committee of the Legislature received testimony and considered the merits of the initiated measure that proposes to repeal all property taxes in North Dakota beginning January 1, 2012. The legislators were not impressed.

Having a working knowledge of the property tax and also having participated in the effort to repeal the personal property tax, I am the first to admit that the property tax has flaws. In fact, the committee supporting the measure is using my statement to that effect in its campaign.

Even though the property tax has flaws, passage of Measure No. 2 would spawn more and greater evils than ever existed in the property tax itself. The unintended consequences of passage would be substantial. There are already scores of unanswered questions that suggest major pitfalls.

First of all, the timing of the measure is terrible. According to the ballot title for the measure, all property taxes will cease on January 1, 2012. However, the measure will not be on the ballot until June by which time the administrative work for the 2012 property tax cycle will almost be completed. By that time, hundreds of assessors will have invested thousands of hours assessing property for the 2012 levies. If the measure passes, there will be no levies and the time will have been wasted.

Since the Legislature will not meet until 2013, replacement revenue will be unknown and unavailable. With no property tax revenue levied for 2012 and no replacement taxes provided, local governments will not be able to do any rational budgeting.

The measure fails to deal in a reasonable way with the outstanding bonded indebtedness across the state, payment for which has been guaranteed partially by property tax revenue. Fifty-eight school districts have outstanding bonds, certificates of indebtedness and/or school construction loans for a grand total of over $300 million.

Theoretically, property taxes will be continued in those districts to finish the payment of these obligations, with the levies placed on the value of property in the areas with bonded indebtedness. Continuing assessments on market value to deal with bonded indebtedness means that the present machinery for administering the property tax will have to remain in place. Assessors will still be needed to determine market value.

Sponsors claim that abolition of the property tax will result in cutting 11,908 public sector jobs. That absurd figure is 10 times the number of employees working on property taxes. The sponsors’ answer is that other public employees, unrelated to the property tax issue, can be fired in other state agencies. No explanation is given for firing employees unrelated to the property tax issue.

They go on to claim that the repeal will result in 11,789 new private sector jobs. Here again, there is no explanation. It seems to be a figure snatched out of the air.

Many of the sponsors’ arguments are based on a dubious report issued by the Beacon Hill Institute at Suffolk University in Boston. The report is full of unfounded assumptions, offering a few sketchy graphs without documentation as to methodology. It advocates state budget cuts but Measure No. 2 commands the Legislature to raise new taxes to replace the property tax. The measure does not provide for making up for the loss of the property tax by firing public employees.

It is obvious that the ramifications of Measure No. 2 have not been seriously considered or anticipated by the sponsoring committee. It needs to back up and start over again. That is why legislators did not greet the measure with a resounding “huzzah!”

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

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