Monday, August 15, 2011
by Brett Narloch
In a recent column, former lieutenant governor Lloyd Omdahl discussed two recent national studies that show that North Dakota isn't as business friendly as we typically think:
Two recent studies by the Council on State Taxation have raised serious doubts about North Dakota’s business climate and warrant the concern of the Legislature and economic development leaders.
One study completed by Ernst & Young calculated business taxes as a proportion of gross state product. With the exception of Alaska, the calculations ranked North Dakota as the state with the greatest burden — 8.5 percent.
South Dakota came in with 4.2; Montana scored 6 and Minnesota around 4.3.
In a second study done by a council task force, the North Dakota property tax system was given a C. This may be a passing grade in school, but it does nothing for the state’s national image when we are trying to attract industry. We need an A.
The task force looked at standardized procedures, fair tax appeal procedures, assessment equity and a category of “other issues”.
North Dakota was given a B- for standardized procedures, a D for tax appeal procedures and a B for assessment equity. The issues involved with standardized procedures and tax appeals are too detailed to cover in a short column, but the issues relating to assessment equity are more relevant and easy to grasp.
The task force complained about the difference between the assessment levels of residential and commercial properties, noting that lower levies on residences must be offset by higher taxes on commercial property.
North Dakota places the taxable value of residential property at 9 percent of the assessed value and 10 percent on commercial property. The starting base for both residential and commercial is market value.
Farmland also is 10 percent, but it doesn’t start with market value. It starts with a productivity formula that puts farmland well below market value and results in wide ranges in assessments from county to county.
When it comes to farmland assessments, the real question the council should have asked is, “10 percent of what?”
They would have discovered this wide discrepancy between farmland and commercial properties and given North Dakota an F. It is not likely that the state can do much about this discrepancy because low farm taxes constitute a part of our goal of keeping farmers on the land.