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States Project Highest Tax Revenues in 5 Years -- and North Dakota Considers Property Tax Ban

Update: Proposal rejected.

While U.S. states expect to collect higher tax revenue in the coming year that combined would top pre-recession levels, according to a survey released Tuesday, North Dakota is considering a ban on property tax, the New York Times reports.

“I would like to be able to know that my home, no matter what happens to my income or my life, is not going to be taken away from me because I can’t pay a tax,” Susan Beehler, an advocate of abolishing the property tax, said in the Times report.

North Dakotans who support the measure argue that the tax is “unpredictable, inconsistent, counter to the concept of property ownership and needless in a state that, thanks in part to wildly successful oil drilling, finds itself in the rare circumstance of carrying budget reserves,” according to the Times.

A worker hangs from an oil derrick outside of Willisburg, N.D. Many say that North Dakota is experiencing the largest oil boom in recent history (AP photo)

“When did we come to believe that government should get rich and we should get poor?” Beehler asked.

On a national level, total tax revenue is forecast to rise 4.1 percent to $690.3 billion in the 2013 budget year, according to a twice-yearly survey by the National Governors Association and the National Association of State Budget Officers. It's the third straight year of revenue growth and $10 billion more than the budget year that ended June 2008, according to the Associated Press.

Total state spending would increase by 2.2 percent and remain below pre-recession levels, the report said.

"The thing we're definitely seeing is stability," said Scott Pattison, executive director of the budget officers' group. Only eight states were forced to close unexpected mid-year budget gaps this year, he said, compared to 39 states two years ago.

Arizona, Ohio, and Michigan are anticipating some of the biggest increases in tax revenue next year. In Ohio, tax revenue is projected to rise to $17.6 billion next year, an 8.6 percent increase from the current budget year.

Others states are seeing less improvement. Iowa, Illinois and Arkansas are among those forecasting small increases.

And even though California is forecasting higher revenue, the state is struggling to close a $16 billion budget deficit and is considering cutting programs. So are many other states. Aid from the federal government is dropping and demand for health care, education, and other services is rising.

The issue of state and local government job cuts inflamed the presidential campaign last week. President Barack Obama on Friday urged Republicans in Congress to approve legislation he has proposed that would enable more teachers and police officers to keep their jobs.

Since August 2008, when state and local government employment peaked, local governments have cut 528,000 jobs. State governments have shed 134,000.

Layoffs are slowing at the state level. State governments added an average of 3,000 jobs a month in the past six months, after cutting an average of 5,200 in the preceding six months. Still, the cuts aren't entirely over: states cut 5,000 jobs in May.

The biggest layoffs have been at the local level, particularly in public schools. Local governments rely on property taxes, which are still declining as property values fall in the wake of the housing bust.

And this is where opponents of abolishing the property tax in North Dakota make their strongest argument: the needs of the public sector.

“This is a plan without a plan,” said Andy Peterson, president and chairman of the North Dakota Chamber of Commerce, in the Times report. “But this solution is a little like giving a barber a razor-sharp butcher knife -- and by the way, this barber is blind -- and asking him or her to give you a haircut. You’ll get the job done, but you might be missing an ear or an eye.”

Apparently, the ballot measure has been met with opposition by the people of North Dakota. Even Gov. Jack Dalrymple (R-ND) opposes the property tax ban.

“It’s mind-boggling, really,” he said, referring to the effects of a property tax ban, “We’d be changing everything, frankly.”

Gov. Jack Dalrymple (R-ND)

Still, even if the ban fails, two things have been accomplished: a) the measure has made a strong impression on conservative circles and b) residents in favor of the property tax ban have finally forced North Dakota politicians to tackle the property tax issue.

“I have to say that we totally understand that North Dakotans are very concerned about their property tax payments,” Gov. Dalrymple said. “You have a tension there, and people say this can’t keep on.”

Update: The people of North Dakota rejected the measure by an overwhelming majority.

"More than 76% voted 'no' in Tuesday's initiative to get rid of the property tax, according to returns from the North Dakota Secretary of State," CNNMoney reports.

"The proposal, known as Measure 2, would have amended the state's constitution. If it had been approved, North Dakota would have been the only state without a property tax," the report adds.

Click here to read the full Times report.

The Associated Press contributed to this report.

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