The coming election of November 5, 2024, presents several interesting issues for voters besides the presidency. One among these is ballot measure #4 in North Dakota which would eliminate the property tax.

“Property taxes are the most egregious and least moral of all the taxes,” according to Rick Becker, chair of the organization that put Measure 4 on the North Dakota state ballot.

In North Dakota, as in all 49 of her sister states, a medley of municipal corporations called “taxing districts” manage the local government. These taxing districts include cities, counties, school districts, fire districts, water districts, sewer districts, irrigation districts, etc. Each of these taxing districts finances itself by adopting an annual budget and levying that budget against the properties in the district.

Are property taxes really the “least moral of all the taxes”? Hmm.      

Image by AI.

Rating taxation devices on a moral scale is a novel idea. However, whether our chickens be pressed into service at the king’s table or our starships be pressed into service in the republic’s fleet, the essential characteristic of taxation remains that government confiscates wealth using the threat of force, rendering that remark of Oliver Wendell Holmes that taxes purchase civilization a naïve whitewash...until there is a Cardassian at the door demanding our money or a squadron of Klingon battle cruisers (or those of the Middle Kingdom) on the horizon.

Given this practical reality of the necessity of the state and taxation, the most that citizens can demand are (1) that the republic be one of laws, (2) that taxation be strictly legal, and (3) that taxation be tightly progressive, meaning the heavier tax burden falls on the shoulders of those most able to pay it. (Or, put another way, is not regressive in that it falls heavily on the shoulders of those least able to pay for it.)

As we shall see, North Dakota’s system meets these demands.

The purpose of the North Dakota property tax is to levy the taxing district budget on the properties of the taxing district in accordance with the North Dakota property tax statutes found in Chapter 57-02 of the North Dakota code.

This tax code is digested and administered by the North Dakota State Tax Commissioner, who issues “guidelines” and publishes “assessment terms and concepts.”

From close examination of the Tax Commissioner’s information we learn:

(1) “The property tax is levied against the property, rather than the property owner”

(2) “The taxable valuation is used to calculate the tax rate and to determine the tax for a property.”

(3) Let us suppose we wish to determine the tax liability of property P in taxing district D. The commissioner tells us, “The tax for a property is determined by multiplying the taxable valuation of that property by the tax rate for that district.” Thus, we have TaxP = TVP x TRD, where

TaxP = “Tax liability for property P”

TVP = “Taxable valuation of property P”

TRD = “Tax rate for taxing district D”

(4) The Commissioner also tells us that “The tax rate for a taxing district is determined by dividing the budget amount levied in dollars by the total taxable valuation of that taxing district.” Hence, TRD = BudgetD / TVD, where

TRD = “Tax rate for taxing district D”

BudgetD = “Budget levied for taxing district D”

TVD = “Total taxable valuation for taxing district D.”

(5) Thus, substituting [BudgetD / TVD] in for TRD in equation (3) above yields TaxP = TVP x [BudgetD / TVD].

(6) Now recall from 8th grade math the theorem x (y/z) = (x/z) y, and use that theorem to reformulate that last equation in (5) above as

TaxP = (TVP / TVD) x BudgetD

The Take away from (6) causes three conclusions to jump out immediately at the reader:

(A) The Tax is Budget-Driven. Tax liability is directly proportional to the district budget. If the budget increases by 10%, then all taxpayers’ tax liability increases by 10%. This is actually good news because adopting the taxing district budget is a political action. The district directors, who are elected officials, create the budget, so their decisions can be subject to property owner influence at the polls.

(B) The Tax is Progressive. The ratio (TVP / TVD) represents the Property P’s portion of the total taxable valuation of the taxing district D. If P’s taxable valuation is 10% of D’s total taxable valuation, then P’s tax liability is 10% of BudgetD. P’s share of BudgetD is P’s share of the taxable valuation of D. Thus the North Dakota property tax is progressive, meaning the heaviest tax burden falls on the shoulders of those most able to pay it.

(C) The Tax is Immune to Inflation. As a direct result of (B) above, if inflation were to cause the taxable valuation of district D to double overnight, the ratio (TVP / TVD) would remain unchanged because the numerator and denominator of the ratio would both double. P’s portion of the BudgetD remains unchanged because P’s portion of D remains changed.

So, the overall conclusion here is that the fundamental culprits in any sense of excessive taxation that North Dakota’s voters experience come from the government budgets and the politicians who adopt them.