North Dakota Voters Reject Dramatic Plan To Eliminate Property Taxes—as Other States Embrace Caps

A ballot question that would have eliminated property taxes in North Dakota was soundly defeated on Tuesday, after critics argued the step would have gutted funding for essential services.

Measure 4, which would have made North Dakota the first state in the nation without any property taxes, was one of nearly a dozen statewide ballot questions on property taxes that appeared on ballots across the country during the general election.

Most of them, including significant new restrictions on property taxes in Georgia and Florida, passed, indicating voter frustration after property taxes soared in recent years. Last year, state and local governments collected about $760 billion in taxes on real and personal property, a 31% increase from 2018, according to U.S. Census Bureau data.

The proposed ban in North Dakota was spearheaded by a former Republican state legislator, who called property taxes “immoral” and expressed anger over their rapid recent increase in the state.

But the measure was opposed by a huge coalition of more than 80 groups, including the North Dakota Fire Chiefs Association, School Board Association, Sheriffs and Deputies Association, EMS Association, the North Dakota AFL-CIO, the Greater North Dakota Chamber, the North Dakota Farmers Union, and the North Dakota League of Cities.

State officials estimated the ban would cost $3.15 billion over two years. Critics had warned that, absent property tax revenue, local governments would have to either dramatically cut services or turn to new statewide income or sales taxes to preserve essential services.

“The North Dakota proposal to eliminate property taxes does not specify what the alternative will be,” notes 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 defeated by a wide margin, with 63.5% voting against the proposal, and 36.5% voting in favor.

Florida and Georgia both limit tax hikes—but with very different approaches

Meanwhile, Florida and Georgia voters both approved measures to limit annual property tax increases—but with major differences that could affect their housing markets very differently.

Florida's approach is more straightforward and less likely to distort the state's housing market. Known as Amendment 5, the measure provides for an annual inflation adjustment for the value of the homestead property tax exemption in Florida.

Homes in Florida are assessed for tax purposes at market value, minus homestead tax exemptions. Most owner-occupied primary residences qualify for two $25,000 homestead tax exemptions, totaling a fixed $50,000 that is exempt from property taxes.

Amendment 5 allows one of those $25,000 exemptions to increase annually in pace with inflation. The adjustment would be made on Jan. 1 each year and would be based on the prior year's percentage change in the Labor Department's consumer price index, as long as the change was positive.

Importantly, the homestead tax exemption applies uniformly to Florida homeowners and remains the same after moving from one home to another, preventing distortions in the market that arise when homeowners refuse to move to cling to a tax benefit.

Georgia's approach fails to avoid that pitfall, however. Known as Amendment 1, Georgia's approach is legally more complicated. But in essence, it allows the passage of legislation that would cap annual property tax increases at the rate of inflation—but only for existing homeowners. When a home is sold, its assessment limit would reset to the current market value.

The Tax Foundation, a center-right think tank, had strongly opposed the measure, saying that it would distort Georgia's housing market by discouraging homeowners from selling or moving, lest they lose their tax benefit.

"This makes it harder for new residents to access housing and could discourage homeownership or shift purchasing patterns to less attractive options among the next generation of Georgia residents who are incentivized to purchase homes that they otherwise would not have purchased," the group wrote.

Oklahoma voters reject special tax districts

Elsewhere, the only other property tax ballot measure to fail was in Oklahoma, where voters rejected a proposal for new special tax districts.

State Question 833 would have allowed municipalities to create public infrastructure districts when all property owners within the proposed district sign a petition, and give those districts the authority to issue bonds for public improvements if approved by voters within the district.

The public infrastructure districts would have been governed by a board of trustees who would have the power to levy a special assessment of up to 10 mills ($10 per $1,000 of assessed value) on properties benefiting from any improvement projects to be used to pay off those bonds.

Supporters billed the measure as a way for homeowners to fund the improvements they desired in their neighborhoods. But opponents argued it would create a system ripe for abuse by developers, who could sell bonds to fund construction of golf courses and swimming pools, and then pass along the repayment obligation to homeowners in the form of higher property taxes.

"Without guardrails, this State Question is an easy grift that profits a handful at the expense of the rest of us," said state Rep. Andy Fugate, a Democrat who opposed the measure.