Report from Representative Rick Holman, District 20
Friday, September 14, 2012
During the time when the North Dakota Legislature is not in session, twenty-eight special committees, called Interim Committees, have been working to prepare for the next Legislative Assembly which begins next January 8th. During this time I have been involved with the Taxation, Human Services, and Redistricting Committees. In this report I will summarize some of the high points from the twenty-one member Interim Taxation Committee. Since the North Dakota’s strong agricultural and energy economy is generating record amounts of income for the state treasury the discussion has been centered on how we can best use this to plan for the future.
The people of North Dakota in the June primary election soundly defeated a proposal to eliminate property tax. Most voters thought the proposal went too far and shifted too much of local control to the state legislature. For the past four years (2009-2012) property taxes have been reduced by replacing 75 mills of local school tax with state funding. Tax Committee proposals encourage continuing this method of tax relief at an increased level of funding transferring more local tax burden to the state. About 50 school districts, because of their tax structure, have not received the full benefit of this type of tax legislation so there also needs to be legislation to correct this inequity.
Resident homeowners would benefit from a proposal to allow a credit on property taxes for a person’s primary residence. Currently the law allows a tax reduction for senior citizens, but a proposal from the Interim Committee would allow a homestead credit of up to 100,000 dollars of valuation for all homeowners.
The Interim Committee is not the only source of proposals coming forward. Both the Democratic and Republican candidates for governor have put forth proposals on how to best use the increased income to the state’s treasury. Gov. Dalrymple and Sen. Taylor have proposals to lower property taxes across the board using the current school mill levy reduction plan. They also propose a homestead credit similar to what is stated above. In addition, Sen. Taylor proposes state income tax relief of up to 900 dollars to those who live in rental property and additional property tax credit for farmers to offset changes in farm residence tax policy.
Another issue of importance is the statewide increase in the valuation of agricultural land. There are four classifications of property for taxation purposes. Residential, commercial, centrally assessed (pipelines, power lines, railroads, etc.) and agricultural. Different from the other classes of property, agricultural land valuations are calculated using a formula which does not directly use market value. Instead, three factors are used to develop a valuation for each parcel of agricultural property. Full and true value is achieved from a formula combining (1) production data (price and yield), (2) cost of production , and (3) capitalization rate (cost of money). These elements establish a more stable and fair valuation for agricultural property owners. Presently, interest rates are low and commodity prices are high, leading to an increase in valuation for nearly all agricultural property. This, together with the end of a capitalization rate minimum sets up a statewide average increase for 2012 of 29%. This dramatic increase in land value could potentially lead to a tax increase unless counties and school districts lower their mill levy. In a perfect world, governmental entities that tie their budgets to property tax will be able to lower the mill rate and generate the necessary income to fund their budgets.
Some problem bills considered by the Interim Tax Committee with little committee support were:
• Remove local authority to set up economic development districts. Failed
• Allow appeal of any tax exemption for new and expanding businesses. Failed
• Remove local authority to set up Renaissance Zones, TIF districts, etc. Failed
• Eliminate the sales tax rebate for Canadian and Montana citizens. Failed
Some of the more notable bills forwarded for consideration by the 2013 Legislative Session are as follows:
• A reduction of tax valuation for a resident 65 years of age or older. Forwarded.
• A reduction of tax valuation for a person’s primary residence. Forwarded.
• A continuation of school mill levy reduction and replacement funding for 2013 and 2014. Forwarded.
• Two-hundred million dollars of property tax relief as a percentage reduction of all levels of property tax. Forwarded.
This is a short description of the result of lengthy discussions over the past year and a half by the Interim Tax Committee. Be assured that there will be many more proposals from individual legislators coming forward in January. Interim committee work, however, helps to sort out and develop consensus on major issues before the actual legislation is considered. The members of this committee and the other twenty-seven interim committees will be better prepared to deal with issues when they come forward in the 80 day 2013 legislative session. The following link will take you to the list of committees and results of their meetings.
Every one of the one-hundred forty-one legislators has ideas on how we should deal with our state’s surplus. Proposals for lower taxes, tax rebates, more infrastructure support, more support for education, and much more will be coming forward in January. North Dakota’s Senators and Representatives come from a wide variety of occupations and bring a cross-section of the population of our state. Your voice and your ideas can add to the discussion. A citizen legislature, as we have in North Dakota, is strengthened by the participation of all stakeholders in the process. Don’t hesitate to contact your representatives with your ideas. Enjoy the fall weather.
Representative Rick Holman, 622 153rd Ave NE, Mayville, ND 58257