Property tax measure would impact more than residential taxes

The American Crystal Sugar beet processing plant north of Hillsboro paid $469,274 in property taxes to Traill County for the 2023 tax year, according to the Traill County Treasurer’s Office. Tax revenue from large commercial properties like American Crystal Sugar would be impacted by the property tax measure approved for the November ballot. (Jeff Beach/North Dakota Monitor)

A ballot measure to eliminate taxes based on assessed property value wouldn’t just overhaul North Dakota’s residential property tax system — it’d also disrupt hundreds of millions of dollars in annual revenue local governments make by taxing other kinds of property.

The measure, approved for the November ballot earlier this month, would bar political subdivisions from “levying any tax on real or personal property except for bonded indebtedness until paid,” according to the North Dakota Secretary of State’s Office.

Adam Mathiak, senior fiscal analyst for the Legislative Council, told lawmakers in a June meeting that the measure could cost the state about $1.3 billion in revenue every year.

Residential property taxes account for only about a third of that, according to data on the Department of Tax Commissioner’s website. The rest comes from agricultural and commercial property taxes, as well as taxes on centrally assessed infrastructure like railroads, airlines and investor-owned public utilities.

Property tax measure approved for November ballot

Rick Becker, chair of the property tax initiative’s sponsoring committee, has said the measure would correct a system that overburdens homeowners and lets big businesses off easy.

He said the measure calls for eliminating assessed-based taxes for all kinds of property because the sponsoring committee felt that would be most fair, and better for the state’s economy in the long run.

“Making it so that this benefit goes to all types of property — including commercial — will be the biggest incentive for bringing businesses, new businesses, new industry, into the state,” he said.

He said the state could make up any lost revenue by dipping into its reserve funding.

“The state easily has the money,” Becker said.

Tax Commissioner Brian Kroshus said he’s heard mixed opinions from the public on how the measure would affect North Dakota’s economy

“Some may think it’s essentially a business incentive for businesses to locate and set up shop in North Dakota, because they won’t have property tax on their building and the land it sits on,”  Kroshus said. “The counter argument to that is, long term, what does the revenue picture look like?”

Several business groups have come out against the measure for exactly that reason.

“There’s no plan to pay for this,” said Andrea Pfennig, director of government affairs at the Greater North Dakota Chamber of Commerce.

Coalition opposing property tax ballot measure urges voters to ‘keep it local’

She said businesses and workers won’t want to move to North Dakota if the state votes to destabilize its own tax system.

Pfennig said the chamber is also concerned that it would deepen economic divisions between rural and urban areas of the state. For one, rural communities — for which land is the most abundant resource — would struggle to diversify their tax base.

Second, if the state had to supplement local governments’ revenue by drawing from its own coffers, urban communities would have more resources to advocate for a cut of that money compared to their rural counterparts, Pfennig said.

“From a policy standpoint, this isn’t the answer,” she said.

The state collected approximately $513 million in residential property taxes for the 2022 fiscal year, according to data published by the Department of Tax Commissioner .

It pulled in another $365 million from commercial property taxes, $249 million from agricultural property taxes and $94 million from taxes on centrally assessed taxes on infrastructure. The report also lists $41 million from special taxes and $147 million from special assessments.

Editor’s note: This story was updated to add clarity related to the Greater North Dakota Chamber of Commerce’s position.

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