September 17th, 2014 Comparing Property Tax Plans The legislative interim committee this week looked at what to do about the property tax shell game

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September 17th, 2014


Comparing Property Tax Plans


The legislative interim committee this week looked at what to do about the property tax shell game.

The debate in the legislature continues to be about how much continuing and expanding the current scheme will cost, and with the exception of Senator Dwight Cook's proposal to change the mill levy system itself, very little in the way of reform is being talked about. It's almost entirely, as usual, about how the state can take on an ever-growing role of bailing out local governments that cannot control themselves and whose voters have been convinced that the state should pay more.

It is hard to tell these days which political party is trying to offer the most conservative tax policy solutions. It is important to remember that the tax policy now embraced by Republicans was, for the most party, policy advocated by Democrats in the late 1990's and early 2000's.

If one tracks the history of the property tax debate within the legislature since the mid-90’s, it is very clear that Democrats (specifically, at the time, state senators Vern Thompson and Joel Heitkamp) set the tone and the language that we use in the property tax debate today. They were the ones that started using the phrase “property taxes are high because the state isn’t spending enough.”

By the second session of his first term, Governor John Hoeven adopted this language as his own to push for higher education spending and higher teacher pay, some might say as a means of “buying off” the teachers union. Very quickly, Republicans recognized that this rhetoric was popular, and adopted it as their own.

By the time Hoeven left office, the states' role of "buying down" property taxes had been fully entrenched as Republican state tax policy. Governor Jack Dalrymple has governed over doubling of that spending, and it is likely another doubling is in the works.

With that as a background of knowing how we got where we are today, it is worth looking at what both parties are offering going forward.

Ryan Rauschenberger's Plan (Republican)

• Continues existing property tax “relief” scheme without substantial reforms.
• (Total claimed price tax extends from $857 million to $1.357 billion).
• $200 million of the $500 million increase may or may not be a double counting of previously acknowledged cost to maintain the new education formula (if it is, it cannot be counted as property tax relief).
• Remaining $300 million is the cost of increasing the property tax credit paid to counties on behalf of property owners from 12% to 25%.

Jason Astrup's Plan (Democrat)

• Leaves new education funding formula in place (same as Republican plan)
• Leaves 12% property tax credit in place without increase ($300 million savings vs. Republican Plan.
• Creates a $75,000 universal homestead credit for all owner-occupied property ($400 million price tag, but only $100 million more than extending the current credit system)
• Creates a 5% up to $500 renters tax credit ($85 million more than Republican Plan)

Republican plan is nominally $200 million cheaper because it does not include a renters' provision and the universal tax credit plan costs a little more, but because the $75,000 homestead credit applies directly to the property tax mill levy formula, it is a more “direct to the taxpayer” approach.

For anyone to say there is a significant difference between the two approaches would be an exaggeration. The Republican plan costs slightly less, but the Democratic plan has a reform provision (universal homestead tax credit) that is appealing.

It's about a coin flips worth of difference, and that should worry taxpayers.


-Dustin Gawrylow, Managing Director

North Dakota Watchdog Network

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