BISMARCK (AP) - One way to resolve the Legislature's endless squabbling about property taxes is to abolish them, says a legislator who proposes a constitutional amendment to accomplish the goal within three years.
The proposal orders the Legislature to use state tax collections to make up the more than $700 million that local governments collect each year in property taxes, starting in January 2012.
Rep. Dan Ruby, R-Minot, told a House Constitutional Revision hearing Thursday that the Legislature could replace the lost revenue without raising state tax rates, an assertion some legislators and lobbyists questioned.
"Once this money is back in the people's hands, most of what they buy, the state's going to get 5 percent of that back in sales tax," Ruby said. "If this helps businesses be able to increase wages, based on not having to pay property tax ... the state's going to get more money back."
Jerry Hjelmstad, a staff attorney for the North Dakota League of Cities, opposed the idea, saying it should include more details about how local governments' property tax collections would be made up.
The proposed amendment says the Legislature must write a formula for distributing state tax revenue to local governments to finance their "legally imposed obligations." Many services local governments provide for their residents are not legally required, Hjelmstad said.
Bev Nielson, a spokeswoman for the North Dakota School Boards Association, called the proposal an interesting concept but said it would stop people who were willing to pay more for local school improvements from doing so.
"Having a local voice and some local ownership and participation in the funding of schools is not a bad thing," she said.
The Constitutional Revision Committee will decide later whether to recommend that the full House approve the proposed amendment. It does not take effect unless approved by the House, Senate and North Dakota voters, who would decide the question in November 2010.
John Fjeldahl, a Berthold resident and Ward County commissioner, and Dennis Stillings, a Valley City resident, said the proposal would be especially helpful to retired North Dakotans who worry about being able to pay the property tax bills on their homes.
Stillings said eliminating the tax would send "shock waves of excitement through the country" and said, "We will be the only state without a property tax."
"It will not be lost on people across the country that, in a state without property tax, they can actually pay off their homes and still own them free and clear," he said. "Business and industry will respond accordingly."
Fjeldahl said property tax burdens have been shifted by granting exemptions as a way to encourage business expansion and job creation, and the tax has lost some legitimacy as a result.
"It's become a vehicle for economic development that has manipulated this tax beyond being fair any more," he said. "When taxation isn't fair across the board to the people we represent, it's being stripped of its validity."
Fjeldahl and Robert Hale, a Minot attorney and businessman, said the proposal would prompt a public debate about property taxes and how they are used to finance government operations.
"You're being asked to provide a forum so the issues surrounding abolition of property taxes can be fully discussed, debated and understood," Hale told the committee.
The bill is HCR3046.