BISMARCK — A North Dakota lawmaker wants voters to decide if the state should abolish property taxes and replace the revenue with other sources, including oil tax money from the Legacy Fund.
But some state leaders fear that using oil tax revenue to permanently eliminate property taxes could put public services at risk if markets decline.
Rep. Rick Becker, R-Bismarck, said Tuesday, March 3, that he plans to submit a proposal to the Secretary of State’s Office next week so he and supporters can start collecting signatures for the initiated constitutional measure. The question would need 26,904 signatures by July 6 to appear on the general election ballot on Nov. 3, but Becker said his group has a goal of 35,000.
If the majority of voters approve the measure, it would count toward the 2022 tax season, Becker said. North Dakota would become the first state in the union to eliminate property taxes.
Putting more money into residents’ pockets would boost the economy, Becker said, arguing his plan is sustainable.
“They can pay down student debt, or they can buy little Susie her braces, or they can do an upgrade to the house,” Becker said of how residents could spend money that would otherwise go toward property taxes. “Whatever it might be, the things that they can do with their own money to better their lives and drive the economy, that’s a winning message.”
North Dakotans turned down a similar constitutional measure in 2012 with nearly 77% of the vote. But Becker argues that the state now has more revenue coming in from oil and other taxes that can easily replace property taxes.
He noted the Legacy Fund, which was set up in 2011 and has more than $6.36 billion in its balance. By 2041, the fund that collects money from oil and natural gas revenues is projected to grow to $27.99 billion.
The state Legislature has been collecting input from residents and organizations on how to spend Legacy Fund earnings, which are projected to be $368 million in the 2021-23 biennium. That number should jump to $639 million in the 2023-25 biennium, according to state projections.
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Becker estimated residents pay about $950 million a year in property taxes. He proposed about $175 million from the Legacy Fund could go to property tax relief each year. “So that still leaves $75 million to do the other stuff or to put back into principal or to use for research or whatever the pet project might be,” Becker said.
He also suggested, among other funding buckets, using $150 million that would have gone into the budget stabilization fund, which cannot take in anymore money. He noted another $200 million that could be used is in the margin of error for projecting revenue forecasts.
Gov. Doug Burgum, speaking through his spokesman Mike Nowatzki, and Senate Majority Leader Rich Wardner, R-Dickinson, both said they would like to see language for the proposed measure before forming an opinion on it.
Burgum, a Republican, has proposed using a portion of the Legacy Fund earnings to reduce property taxes through “smart growth incentives,” Nowatzki said.
“But the governor would have reservations about any plan that, one, relies on tax revenue from a finite resource such as oil that is subject to market volatility as a means to permanently eliminate property tax, and, two, shifts control and spending away from local political subdivisions to the state,” Nowatzki said in an email.
Wardner said he was “absolutely opposed” to using the Legacy Fund to eliminate property taxes. He said using that money would leave less for infrastructure and potentially put some public services at risk of being cut.
“The other big thing is, I cannot believe that we're going to give up local control,” he said of the proposed measure. “And if we give up the property tax, then we won't have no local control. The state will decide on how much money each community will get. And if it isn't enough, it will be tough."
Fargo City Commissioner Tony Gehrig, who supports Becker’s campaign to get the measure on the ballot, called those arguments “red herrings.” The state would be required to replace property tax revenues if the measure passes, but nothing in the state constitution would give the state government control over how that money is spent, Becker said.
Gehrig said the state should give money to long-term tax relief if it has the funds.
“What better legacy could there be than to use the funds to end property taxes forever?” he asked.