Big Idea, Big No: North Dakota Declines Property Tax Elimination Amid Cap Wave

A ballot measure to eliminate property taxes in North Dakota was decisively rejected on Nov. 5 following opposition that warned it would severely cut funding for essential services.

Measure 4, which sought to make North Dakota the first state without property taxes, was one of nearly a dozen property tax-related ballot measures across the country in the general election, according to Realtor.com.

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Most of the measures passed, including new restrictions on property taxes in Georgia and Florida, reflecting voter frustration as property taxes have surged in recent years. In 2022, state and local governments collected roughly $760 billion in taxes on real and personal property – a 31% increase since 2018, according to U.S. Census Bureau data.

The proposed property tax ban in North Dakota was led by a former Republican state legislator, who described property taxes as "immoral" and voiced frustration over their recent rapid increase in the state.

However, the measure faced strong opposition by a broad coalition of over 80 organizations, including the North Dakota Fire Chiefs Association, School Board Association, Sheriffs and Deputies Association, EMS Association, North Dakota AFL-CIO, the Greater North Dakota Chamber, North Dakota Farmers Union and the North Dakota League of Cities.

State officials estimated the property tax ban would cost $3.15 billion over two years. Critics cautioned that without property tax revenue, local governments would be forced to cut services or rely on new statewide income or sales taxes to fund essential services.

"The North Dakota proposal to eliminate property taxes does not specify what the alternative will be," said Realtor.com Chief Economist Danielle Hale. "The property tax in North Dakota could stand to be reformed, but getting rid of it entirely could create bigger problems than property owners currently face."

Ultimately, Measure 4 was rejected significantly, with 63.5% voting against it and 36.5% in favor.

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Florida And Georgia Take Different Approaches To Limit Tax Hikes

Voters in Florida and Georgia approved measures to limit annual property tax increases but with key differences that could have distinct impacts on their housing markets.

"Florida's approach, known as Amendment 5, is simpler and less likely to disrupt the housing market." The measure allows an annual inflation adjustment for one of the two $25,000 homestead tax exemptions available to most primary residences in Florida, which are assessed at market value.

The adjusted exemption will increase each year on Jan. 1 based on the previous year's inflation rate, provided that the Labor Department's consumer price index shows a positive change. Florida's homestead exemption applies uniformly to all homeowners and remains consistent even when moving to a new home, helping to avoid market distortions that arise when homeowners feel compelled to stay put to retain a tax benefit.

In contrast, Georgia's Amendment 1, a more complex measure, caps annual property tax increases to the inflation rate but only for existing homeowners. Upon sale the home's tax assessment resets to the current market value, which could discourage sales as owners hesitate to lose their capped rates.

The Tax Foundation, a center-right think tank, opposed the Georgia measure, arguing it would distort the housing market by incentivizing homeowners to stay rather than face higher taxes on a new property.

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Oklahoma Voters Scrap Special Tax Districts

In Oklahoma, voters rejected the only other property tax ballot to fail nationwide: a proposal for new special tax districts.

State Question 833 would have permitted municipalities to establish public infrastructure districts, contingent on a petition signed by all property owners within the proposed district. The districts would then have the authority to issue bonds for public improvements, provided they were approved by district voters.

Governed by a board of trustees, the districts could levy a special assessment of up to 10 mills ($10 per $1,000 of assessed value) on properties benefiting from improvements to fund bond repayment.

Supporters promoted the measure as a way for homeowners to finance improvements in their communities directly. Opponents contended it could be exploited by developers who might sell bonds to fund amenities like golf courses or swimming pools, ultimately shifting the repayment burden to homeowners through increased property taxes.

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