Efforts to reform North Dakota's tax system are moving forward as tax collections continue to come at higher than forecasted rates, according to the chairman of the Legislature's interim taxation committee.
Sen. Dwight Cook, R-Mandan, and state Tax Commissioner Ryan Rauschenberger spoke to the Minot Area Chamber of Commerce's Governmental Affairs Committee Friday.
"Taxes need to be fair, they need to be simple and we have work to do," said Cook, who chairs the interim committee and serves on the governor's task force looking at tax reform.
Sen. Dwight Cook hands out information to attendees at the Minot Area Chamber of Commerce’s Government Affairs Committee meeting Friday.
The focus of the tax force is on simplifying the tax system, he said.
"It will make the budget process easier for the taxpayer to understand. The ultimate goal is to empower the taxpayer so we get more voice out of the taxpayer when the budgets are being formed," he said.
One issue is the state's four levels of tax assessors, all with differing training requirements. Cook said the goal is to create one uniform system and make training more available.
Uniformity also is an issue in the valuation formula for agricultural land, he said. The state allows modifiers in the formula to account for soil that might be hilly or rocky, but counties apply those modifiers differently. The difference can be so great, he noted, that one North Dakota farmer with land in three counties reported pasture land assessed at a higher value than cropland.
"The real challenge of the property tax is the taxpayer has very little control on either side," Cook said, referring to assessments and the mill levy.
Ward County Auditor Devra Smestad voiced her concern over the state's emphasis on the mills, a taxing unit that she would like to see replaced. The state allows a certain number of mills for entities such as fairs or Garrison Diversion and has mill levy requirements before it will match certain funds, such as road funds.
Smestad said she prefers that entities tax for the dollars they need rather than the mill levy they are allowed. By basing budgets on levies, some entities can reap a windfall when property values go up.
"This past year, the values were up so much that we had almost a 26 percent increase," she said.
Cook said a bill draft is being developed that would address that concern. One solution is to establish a tax rate by dividing the property tax by the property valuation. Setting the tax at a certain rate is simple for the taxpayers to understand, and it works well with commercial and agricultural property. Research still is going into making the tax-rate plan work as well for residential property, he said.
The task force is expected to produce legislation to be considered in 2015.
"It's a full-court press on property-tax reform," Cook said. The task force is examining the state's many political subdivisions that levy property taxes to streamline the process and also identify potential areas, such as county social services, that could become state functions.
The state is in a financial position to make some changes.
Rauschenberger said if oil revenue continues at $250 million a month as it has earlier this year, the state will take in about $800,000 million more than forecasted.
Increased oil income and a strong economy have enabled the Legislature to cut individual income taxes by 38 percent since 2009, he said. The state is collecting about $800 million a biennium from income tax and nearly $2.5 billion from sales and use taxes.