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Published May 29, 2012, 10:08 AM

ND lawmakers take up property tax exemption idea

BISMARCK, N.D. (AP) — Two weeks before North Dakotans will vote on whether to abolish their property taxes, lawmakers debated a proposal Tuesday offering homeowners a hefty exemption that would save them hundreds of dollars on their annual tax bills.

BISMARCK, N.D. (AP) — Two weeks before North Dakotans will vote on whether to abolish their property taxes, lawmakers debated a proposal Tuesday offering homeowners a hefty exemption that would save them hundreds of dollars on their annual tax bills.

Under the measure, a North Dakota homeowner wouldn't have to pay property taxes on the first $75,000 of the value of his or her principal residence. The exemption would rise to $125,000 if the homeowner was at least 65 years old.

The Legislature's interim Taxation Committee reviewed the proposal Tuesday but did not take action. Lawmakers said it is likely to be only one ingredient in a stew of ideas that the 2013 Legislature will sample.

"We have to keep in perspective that there's going to be a large number of bills in the next legislative session dealing with property tax and property tax relief," said Rep. Wes Belter, R-Fargo, chairman of the North Dakota House's Finance and Taxation Committee.

The legislation would be irrelevant if North Dakotans approve Measure 2, a constitutional amendment that would abolish property taxes. Measure 2 is one of four statewide initiatives that North Dakotans will decide in the June 12 primary election.

A recent public opinion poll showed widespread opposition to the amendment, and legislators said Tuesday they wanted to be ready with reform alternatives. Lawmakers have endorsed other methods for cutting local property taxes, most recently a plan that would provide $342 million to schools over two years in exchange for property tax rate cuts.

In Tuesday's debated proposal, exempting the first $75,000 of a home's value from property taxes would be on top of the existing aid program, Belter said. It also includes $384 million in payments to local governments over two years to make up the property tax revenues they would otherwise lose.

For homeowners, the savings could be substantial. For example, the property tax bill of a home in Bismarck valued at $150,000 would be cut in half, from $2,132 annually to $1,066, with a $75,000 exemption. The same homeowner is now paying about 20 percent less in property taxes because of the Legislature's existing property tax reduction program.

The new proposal, however, benefits North Dakota homeowners only, a factor that raised eyebrows among some lawmakers who believe agricultural and commercial property should be included in any tax relief effort.

"I really have a problem with just one (type of) property getting this much tax relief," said Rep. Jerry Kelsh, D-Fullerton, the House's Democratic leader.

Farm land makes up about a quarter of the state's property value, and "it really won't get (anything) out of this," said Kelsh, who represents a rural farming and ranching district in southeastern North Dakota. "I think that's inherently wrong."

Rep. Jim Kasper, R-Fargo, is drafting separate legislation that would exempt the first $150,000 of property value from taxation and apply it equally to a home, commercial real estate and farm and ranch land, Kasper said in a telephone interview Tuesday.

"We're not going to shortchange agricultural land or commercial buildings," Kasper said. "That is a key component of it."

His proposal would also freeze a property owner's property tax bill once he or she reaches age 65, Kasper said.

Kasper said his initiative would require $500 million to $550 million in annual payments to local governments to make up for lost property tax revenue. It would be financed in part by eliminating the school property tax subsidy program, for which the Legislature has set aside about $170 million annually.

By subsidizing school property tax rates, Kasper said, "you have an increasing state obligation that is never going to stop going up."

Copyright 2012 The Associated Press.

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