A Short Summary Of The Long History Of Doing Nothing On Property Tax
The legislature has approved billions in state spending to paper-over property tax burdens increasing, while doing nothing of substance besides talking about actual reforms.
Property taxes have always been the most hated taxes.
For generations, the North Dakota legislature has repeatedly failed to meaningfully address the state's property tax system, despite decades of voter frustration. While the legislature has passed sweeping budgets and conducted countless studies, the core issue of property tax reform remains unresolved, leaving voters to take matters into their own hands time and again. This article delves into the history of property tax reform—or the lack thereof—in North Dakota, from failed ballot measures in the early 20th century to the convoluted tax relief efforts of recent years.
Voters Have ALWAYS Had To TRY To Take Their Own Action On Property Taxes
Since as early as 1924, North Dakota voters have sought to rein in property taxes through ballot measures, often in response to legislative inaction. The first significant effort was a proposal to cap property tax revenues at 75% of the 1923 levels. Although it failed, this set the stage for what would become a recurring theme—citizens attempting to take the reins on property tax reform.
Throughout the 1930s and 1940s, several measures to reduce the taxable value of property or introduce different classes of property for tax purposes were proposed, with mixed results. In 1932, for instance, voters succeeded in lowering the assessed value of property from 75% to 50%, but subsequent efforts to create more equitable taxation systems, such as a graduated land tax, repeatedly failed.
By the 1950s, after decades of piecemeal reforms and repeated failures, the issue of property taxes largely disappeared from the ballot. However, voter frustration simmered beneath the surface, waiting to reemerge in the modern era.
According to the historical list of ballot measures, the voters of North Dakota have always had to take property taxes into their own hands due to the inaction of the legislature:
1924: A ballot measure to “reduce the amount to be levied and spent to not more than 75 percent of what was collected in 1923. Political subdivisions could go up to 90 percent upon approval of the electorate at a special election.” failed.
1932: A ballot measure “reducing the taxable assessed valuation of property from 75% to 50%” passed. (The legislature has previously reduced it from 100% to 75%, and would reduce it to 50% later in the decade)
1940: A ballot measure “proposing three classes of property for tax purposes: 100% valuation for property assessed by state Board of Equalization; 75% on business inventories: 50% on household goods” failed.
1940: A ballot measure to “permit abatement of past, present and future taxes based on excessive valuation” failed.
1942: A ballot measure “providing for three classes of property for tax purposes.” failed.
1942: A ballot measure to “permit enactment of a graduated land tax on farms in excess of $15,000 valuation” failed.
1950: A ballot measure to “permit a graduated land tax” failed, that idea failed again in 1954 as well.
1964: A ballot measure to “exempt personal property from taxation” failed, and it failed again on a 1965 special election ballot. (it was eventually passed legislatively in 1969)
Property taxes then took a 40 year hiatus from being a ballot measure issue.
1997 Interim Study On “PROPERTY TAX RELIEF THROUGH ALTERNATIVE SOURCES”
Back in 1997, the legislature tried to tackle property taxes in an interim study.
Here are some of the conclusions from that study:
During the 1993-94 interim, the Legislative Council’s Taxation Committee contracted with a consultant for preparation of a study of tax burden comparisons within the state and with neighboring states during the period from 1960 to 1992. The study converted tax collections to “real” dollars for comparison. Comparison of tax trends over time can be misleading unless adjustments for inflation are made. For example, a $300 tax per capita in 1960 would have reduced a person’s disposable income more than a $1,400 tax per capita did in 1992. All tax collections reported in nominal dollars were converted into real 1994 dollars using the consumer price index. Updating the statistics in the study would require analysis by the consultants who prepared the 1994 study because figures were converted to 1994 dollars by the consultants.
In 1960 local tax collections accounted for 55 percent of all state and local taxes in North Dakota, but in 1992 state taxes accounted for 66 percent of all state and local taxes in North Dakota. During the period from 1960 to 1984, the local share of the overall tax burden decreased steadily. The state and local tax burdens were about equal in 1970. By 1984 the state share of tax collections was at 73 percent, a maximum for the period from 1960 through 1992. Since 1984 the trend has reversed and the local portion of tax collections is increasing.
North Dakota has relied heavily on stable tax sources such as sales and property taxes. This policy maintains tax collections in times of a stable or declining economy but does not capture benefits of a growing economy as would occur with heavier reliance on an income tax, which grows with the economy. For a time, North Dakota placed a heavy reliance on energy taxes, which are subject to the state of the world economy and the vagaries of the international oil market. This reliance diminished the degree of reliability of the tax system to generate a reliable flow of revenue
The study concluded that North Dakota relies on sales taxes more than the other states considered in the study except South Dakota. North Dakota’s sales and use taxes paid by a typical family of four are the highest of any state in the study. However, local sales taxes were not included in these computations and many South Dakota cities impose a two percent local sales tax.
The study concluded that North Dakota’s reliance on property tax is the lowest of the six states in the study, even though North Dakota has shown a recent increased reliance on property tax revenues. Some of the burden of North Dakota property taxes has shifted from agricultural and centrally assessed property to residential and commercial property.
Notwithstanding the study conclusion, the committee received testimony indicating that recent increased reliance on property tax revenues has been too extensive. Whether this is a result of what was described to the committee as “taxation by referral” is debatable, but several groups and individuals suggested that tax policy should reverse the trend to increased reliance on property tax revenues.
The study concluded that assessment of the size of the tax bite, its burden on taxpayers, and its adherence to principles of public finance depend in large part on perspective. North Dakota’s tax burden has shifted from local to state sources while increasing in real terms and, at the same time, decreasing relative to income. Personal income has grown faster than the cost of government in North Dakota, causing taxes as a percentage of personal income to decline. Compared to neighboring states, North Dakota’s tax structure is about average in the amount collected and distribution of the tax burden.
The Studying Of Property Taxes Has Been Continuous, Leading To Nowhere
Fast forward to the late 20th century, and property taxes once again became a focal point for legislative study—but not for reform. In 1997, a major interim study aimed at evaluating property tax relief and alternative funding mechanisms for local governments concluded that North Dakota's reliance on property taxes was relatively low compared to neighboring states. Yet, it also acknowledged that there was a troubling trend of increasing reliance on property taxes in recent years, particularly for residential and commercial properties.
Despite these findings, the state legislature opted for band-aid solutions rather than comprehensive reforms. Over the years, a series of studies in 1981, 2001, 2005, and 2007 examined potential solutions to the property tax burden, but no significant changes were enacted. Each study came to similar conclusions: North Dakota's tax system was relatively average compared to neighboring states, and any major structural changes would require significant political will. That will, however, never materialized.
Over the years, the legislature has continued to “study” property taxes and potential solutions - getting nowhere.
The following are the various interim studies done over the years:
1981 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/15.9096.01000.pdf
2001 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/39053.pdf
2005 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/79014.pdf
2007 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/99056.pdf
2007 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/99122.pdf
2009 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/19079.pdf
2011 (related to 2012’s Measure 2) - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/13.9018.01000.pdf
2011 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/13.9044.01000.pdf
2013 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/15.9030.01000.pdf
2017 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/19.9035.01000.pdf
2022 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/23.9275.01000.pdf
2023 - https://ndlegis.gov/sites/default/files/resource/committee-memorandum/25.9060.01000.pdf
The Genesis of “Buying-Down” Property Taxes
Historically, when the state wanted to help locals hold the line on property taxes, it would simply provide more funding to local government. This was the line that Democrats pushed in the 80s, 90’s and early 2000’s.
During the early 2000s, as public dissatisfaction with property taxes grew, the state turned to what many consider to be a superficial fix: the "buy-down" policy. Initiated in 2007 and fully implemented in 2009, the state began appropriating millions of dollars to local school districts in an effort to reduce property taxes indirectly. Senate Bill 2199, passed in 2009, allocated $295 million to schools with the explicit purpose of lowering property taxes. While this provided temporary relief, it did nothing to address the underlying structural issues of the property tax system.
During the John Hoeven administration, Republicans decided that if they the state was going to get more involved in funding local government, Republicans needed to receive more explicit credit for “relieving property taxes” rather than simply spending more state money.
Prior to the Bakken Oil Boom, which started in 2007 and really took off by the 2009 legislative session, there wasn’t a lot of spare money around to do this.
This strategy continued into the 2010s, reaching its peak during the Bakken oil boom. Flush with oil revenue, the state was able to maintain the buy-down approach for several years, but as oil revenues declined, so did the sustainability of the policy. By 2017, the buy-down strategy began to unravel, as the state shifted responsibility for funding local services back to counties, leaving local governments with no choice but to raise property taxes again.
In 2005, House Bill 1512 sought to increase the state income tax (which was much higher than it is today in 2024) by 33% to provide more funding for K-12 education. Because the House was not nearly as conservative then as it is today, it actually passed the House by a vote of 49-41 and ended up getting defeated in the Senate only garnering 3 votes for the massive tax increase and tax shift at the time.
While that bill failed, it paved the way for policies that would simply band-aid over the problems association with property tax burdens growing.
In 2007, Senate Bill 2032 provided a homestead income tax credit for individuals for taxable years 2007 and 2008 in the amount of 10 percent of property taxes or mobile home taxes that became due during the tax year and had been paid on the individual's homestead. The amount of the homestead income tax credit for a year could not exceed $1,000 for married persons filing a joint return or $500 for a single individual or married individuals filing separate returns. (It is worth noting this approach was “borrowed” from a bill introduced by State Senator Tracy Potter (D-Bismarck), and that the $500 property tax credit approved in the 2023 was basically the same concept as well.
In 2009, the “buy-down” policy was fully implemented via Senate Bill 2199 which “provided property tax relief by appropriating $295 million for the 2009-11 biennium for allocation to school districts to reduce school district property taxes.” That specific “buy-down” policy was continued in 2011 via House Bill 1047.
In 2013, as the Bakken Boom hit its peak growth phase, the legislature continued the “buy-down” policy, and added massive education funding increases at the request of Governor Jack Dalrymple to bring state funding of K-12 up to a 70% target.
The “Buy-Down” Exit Strategy Begins
On top of the “buy-down” the legislature added a 12% state paid property tax credit to be paid directly to counties. That 12% credit lasted until 2017.
When Governor Doug Burgum entered office, he wanted to take a new approach, but struggled to get the legislature to agree.
2017 ultimately saw the beginning of the shift of social services away from the county property tax burden onto the state. While this has resulted in local dollar savings, many now believe the services rendered to the public have diminished in quality despite increasing the state tax dollar cost.
2017 also saw changes to transparency, reporting, deadline dates for the local property tax process.
The 2019 legislative session started tackling an exit strategy for the failed “buy-down” policy by rolling base state subsidies for local government, and giving local government more latitude to increase their own taxes.
House Bill No. 1268 (2019) increased the maximum amount a county may levy for emergency medical service purposes from 10 to 15 mills. Senate Bill No. 2052 (2019) provided the board of a school district the ability to levy up to 5 mills for purposes of developing a school safety plan upon approval by a majority of the qualified electors voting on the question. The bill provided approval or reauthorization of the levy authority may not be effective for more than 5 taxable years.
Senate Bill No. 2265 (2019) phased school districts levying less than 60 mills to a uniform 60 mill deduction by 2025 for purposes of calculating state aid payments. The bill allowed a school district to increase its property tax levy by an amount equivalent to the increased deduction amount during the phase-in period. The bill eliminated the increased levy authority and reverted school districts to levying a tax not exceeding the amount of dollars levied in the prior year, plus 12 percent, not to exceed a levy of 70 mills, for taxable years beginning after December 31, 2024.
On the positive side in 2019, the homestead tax credit was increased for older fixed income homeowners.
2021 was fairly quiet on property taxes, and 2023 saw the reintroduction of the $500 tax credit first utilized in 2007.
For more on the recent history of legislative spending attempts to smooth over rising property taxes, without offering structural reforms, refer to the legislative memo issued in 2023.
Legislature Rejected Every Meaningful Structural Reform To The Property Tax System
Despite numerous attempts at reform, the North Dakota legislature has consistently rejected meaningful changes to the property tax system. Since 2007, a variety of bills aimed at capping annual property tax increases, eliminating property taxes entirely, or shifting the burden away from local governments have been introduced—and soundly defeated.
In 2009, a proposal (HCR 3046) to eliminate property taxes was introduced but failed to pass the House. It wasn’t until 2012 that North Dakota voters got a direct say on whether to abolish property taxes altogether. The result? A resounding defeat, with only 23% voting in favor of the measure.
Even modest attempts at limiting tax increases, such as a 2019 bill (HB 1182) to cap annual property tax valuation increases at 3%, have failed. As recently as 2023, a constitutional amendment that would have prohibited property tax levies except for limited purposes was defeated, garnering just 18 votes in the House.
Here is a look at just some of the various ways just since 2007 that the legislature has refused to enact structural reforms short of the elimination of property taxes, but that did more than just increase reporting and transparency requirements. (You will notice most of these originated in the House as it has been the more conservative chamber since 2007. This list also does not include reforms to property tax exemptions which, if eliminated, would reduce overall tax burdens by making more properties pay property taxes.)
2007
Defeated - HB 1276 - 2% per parcel annual limit on dollar-based increases in property taxes - 6 Yes votes in the House.
Defeated - HB 1335 - 5% per parcel annual limit increase in property taxes (among other provisions) - 17 Yes votes in the House.
Defeated - HB 1449 - removed the value increase caused by infrastructure improvements using special assessments from the overall valuation increase formula; imposed a 2% per parcel valuation increase limit, and expanded the Homestead Tax credit - 27 Yes votes in the House.
Defeated - HB 1394 - limited valuations to 94% of true and full value - 34 Yes votes in the House.
2009
Defeated - HB 1473 - allowed local voters to refer local budgets by referral petition - 36 Yes votes in the House.
Defeated - HB 1558 - 2% per parcel annual limit on dollar-based increases in property taxes - 17 Yes votes in the House.
Defeated - HB 1422 - required relative age, location, and condition be including in automatic market value calculations; required to exclude special assessment balance from valuation; limited per parcel increases to 2% in dollars - 33 Yes votes in the House.
Defeated - HB 1388 - required special assessment values to be removed from valuation - 47 Yes votes in the House.
2011
Passed (Watered Down) - HB 1194 - this bill ended up being a watered down notice and disclosure bill. The original version was closer to a reform I had been pushing at the time attempting remedy the automatic unrealized gain problem inherent to property taxes.
The watered down version of HB 1194 passed the House with 57 vote on reconsideration, and passed the Senate with 31 votes.
Defeated - HB 1293 - 4% per parcel annual limit on dollar-based increases in property taxes - 15 Yes votes in the House.
Defeated - HB 1272 - 3% per parcel annual limit on dollar-based increases in property taxes - 12 Yes votes in the House.
Defeated - HB 1282 - required relative age and location of residential property must be considered in determination of market value, and that special assessments be deducted from the valuation - 7 Yes votes in the House.
2013
Passed - SCR 4030 - started as a Constitutional Amendment to require “uniformity of property taxation among classes of property and requiring use of assessed value as the actual value of property for property tax purposes”. It ended up being watered down into an interim study. (This is an issue that still exists and the original version should be reconsidered to address the property tax assessment racket. )
In 2013, three separate interim studies to look at replacing local property taxes were introduced:
Passed - HCR 3019 - sought to study the whole property tax system, and it passed.
Passed - SCR 4023 - sought to study “ whether political subdivisions can become more efficient and effective to reduce costs to taxpayers” and it passed.
Withdrawn - SCR 4021 - sought to “study feasibility, consequences, and desirability of elimination of property taxes”, but it was withdrawn.
2015
The 2015 session passed several changes to notices and transparency. Because the oil market had crashed winter, the legislature was not thinking about a lot of different property tax bills. Limitation bills such as in previous years were once again defeated, as was HCR 3021 to study replacing local property taxes permanently.
2017
Two bills addressing limitations were introduced, HB 1276 and HB 1361, both efforts were abandoned by their sponsors.
Efforts to attempt to reform property taxes at this point really started to sputter out, even among the hardcore conservatives who had been pushing for years (even the most dedicated can only fight lost causes for so long). Backing out of the failed “buy-down” policy became the primary focus.
2019
Defeated - HB 1182 - would have limited increases in assessed valuation of property parcels to no more than three percent each year. 28 Yes votes in the House.
Defeated - HB 1380 - would have limited the dollar increases in property tax levied to 3% and limits the increase deducted from the funding formula to 3%. This limit does not apply to school districts until after school year 2021. 25 Yes votes in the House.
Defeated - HCR 3046 - study the feasibility and desirability of replacing revenue generated by residential property tax with an alternative local funding source.
2021
Defeated - HB 1192 - limited a taxing districts ability to increase it taxes as well as limits the taxable value on any parcel of taxable property. 20 Yes votes in the House.
Defeated - HB 1200 - limited a taxing district's ability to increase tax levies more than two percent without voter approval. 16 Yes votes in the House.
Defeated - SCR 4006 - prohibited the unconstitutional use of property taxes to fund North Dakota's legal obligations (specifically K-12 school spending).
2023
Defeated - HCR 3024 - was a constitutional amendment seeking to “prohibit the levy of property tax, except for limited purposes, provides for the replacement of lost property tax revenue through increased sales tax, and prohibits the issuance of general obligation bonds secured with property tax.” 18 Yes votes in the House.
Defeated - HB 1248 - was a “study of restructuring the taxation of residential and commercial property.” 14 Yes votes in the House.
Defeated - HB 1461 - sought to “limit tax increases from 12% to 5% in dollars in the school district funding formula and limits the amount of dollars that a taxing district can levy.” 41 Yes votes in the House.
Again, this is not an all-inclusive list, but it gives a sense of just how many property tax reform ideas were flat rejected by the legislature.
Attempts to Abolish Property
In 2009, HCR 3046 was introduced by Representatives Dan Ruby, Representative Blair Thoreson, and Senator Joe Miller to place a measure on the 2010 ballot “relating to elimination of property taxes; to repeal sections 5, 6, 7, 9, and 10 of article X of the Constitution of North Dakota, relating to elimination of property taxes, poll taxes, and acreage taxes; to provide for a legislative council study before placement of this measure on the ballot; and to provide an effective date.”
This resolution failed to make it out of the House, but was the basis of the eventual 2012 approach.
And 2012 was the first time the voters actually has a chance to vote to eliminate property taxes entirely and only 23% of North Dakotans voted Yes.
In 201617, State Representative Scott Louser made a strong push to eliminate K-12 education property taxes with state funding.
Which brings us to 2024’s Measure 4.
A Future Without Reform?
As North Dakota approaches the 2024 election, the property tax debate shows no signs of abating. Measure 4, which will appear on the ballot, aims to tackle the property tax issue yet again. However, given the state’s long history of legislative inaction and the failure of past reform efforts, many voters are skeptical that any meaningful change will come.
Property taxes remain one of the most hotly debated issues in North Dakota politics, yet the core problem remains unresolved. For nearly a century, the state's leaders have punted on property tax reform, leaving citizens to shoulder an increasingly burdensome system with little hope for relief.
As property owners prepare to receive their annual tax bills, many are left wondering: will North Dakota ever see meaningful property tax reform, or will it remain mired in the cycle of studies, failed reforms, and superficial fixes?
Only time—and perhaps the next election—will tell.
The Watchdog Plan For Property Tax Reform
Below is a mix of proposals that should be considered at the next legislative session *if* the voters of North Dakota decide to give the legislature another chance to fix property taxes short of total elimination.
Major Changes
Fully fund K-12 education with state revenue—there is easily $1.0 to $1.3 billion in state spending on corporate welfare, subsidies, and other wasteful programs that can be eliminated.
Eliminate all discretionary local property tax exemptions, and replace state-mandated exemptions with a single, flat, universal exemption of at least $100,000 for every property—residential, commercial, and agricultural—and declare North Dakota’s economy “developed.” This would permanently expand the tax base in major cities by 5-20%, depending on the city.
Require tax-exempt properties (churches, schools, hospitals, non-profits) to pay a flat Basic Services fee.
Allow cities to charge surcharges on properties that require more law enforcement attention (such as bars, hotels/motels, apartments, trailer parks, etc.), while simultaneously converting trailer parks and apartments from being taxed commercially to being taxed as residential.
Freeze valuations on owner-occupied properties after 15 years. This would create a protection similar to California’s Prop 13, but because the freeze occurs after 15 years rather than at the time of sale, it reduces the negative effects of restricting supply.
Minor Changes
Standardize the property assessment process by placing the state tax department in charge of training and overseeing all property assessments statewide. Prohibit the outsourcing of assessments to for-profit corporations (e.g., Vanguard Appraisals).
Eliminate the threat of eviction by prohibiting local and state governments from seizing private property from citizens. Instead, implement wage garnishment as a method for recovering owed property taxes.
Allow income-tested senior citizens to defer their tax payments entirely by applying the owed amount as a lien against the property, to be collected when the owner passes away (essentially a “reverse mortgage” without a bank being involved).
If Measure 4 fails, and the legislature keeps kicking the can down the road, it will be a matter of time before the voters say they have had enough - either by approving the next measure, or by changing who they send to Bismarck.