North Dakota voters decide not to eliminate property taxes

North Dakota’s “Measure 2,” which would have completely eliminated property taxes, was “soundly defeated” on Tuesday night, according to the Associated Press.  Polls had shown about 70 percent opposition to the measure, which made it to the ballot with strong Tea Party support.

If it had passed, North Dakota would have become the first state in the nation to abolish property taxes.  This would have resulted in about $800 million in lost annual revenue to the state, which would likely have been made up through increases in other taxes – a commonly cited reason for opposition.  Also, property taxes are a primary source of revenue for local governments, and opponents of Measure 2 felt they would have become overly dependent upon the state for funding without them.

Supporters had countered that North Dakota’s booming oil industry could provide enough tax revenue to replace property taxes, but it would appear the voters rejected that argument.  Some worried that the oil boom might end abruptly, wreaking havoc with the state’s finances. Measure 2 supporters maintained this very apprehension would be a useful means of pressuring the government to keep spending down.

Some interesting points were raised by proponents of the measure.  They questioned the basic fairness of property taxes, which are not evenly dispersed across the population, as not everyone owns property, and not all property is taxed equally.  (The maze of special property tax rates and exemptions is a prime target for reformers.)  Some critics view property taxes as a way to farm revenue from an essentially captive population.  Boom-and-bust cycles do affect property tax revenue, as the collapse in home values dramatically illustrates.

Measure 2 advocates noted that property taxes aren’t entirely controlled by local government, contrary to popular impressions, because the state government exerts considerable control over the valuation of property, and the assessment of taxes upon it.  It is always productive to debate the limits of “local” control, and the devolution of power to lower levels of government.

There seems to be widespread agreement in North Dakota that the property tax system is a mess.  Reformers can hope that the push for Measure 2 will serve as a wake-up call to the state legislature… and perhaps government in other states with even higher, messier property taxes.