North Dakota has signed into law a property tax relief package that wipes out tax bills entirely for roughly 50,000 households, and Colorado has announced its own bipartisan plan to cut property taxes and cap future increases. These moves are part of a broader state-level push to slash or eliminate property taxes, but the revenue gaps they create are already forcing local governments to consider sharp sales tax increases to keep basic services funded. The tradeoff could leave lower-income residents paying more at the register even as homeowners celebrate smaller bills.
North Dakota’s $1,600 Credit Erases Bills for 30% of Homeowners
The most aggressive action so far comes from North Dakota, where lawmakers approved House Bill 1176 during the 69th Assembly in 2025. The law creates a Primary Residence Credit of up to $1,600 that offsets or completely erases property tax bills for qualifying homeowners. According to the state tax commissioner’s data, the credit eliminates property taxes for about 50,000 households, roughly 30% of eligible residences. Policymakers have framed the legislation as a path toward near-zero property taxes for many homeowners, and the credit cannot exceed the actual tax due, preventing refund windfalls.
The law also includes structural limits on local levy growth, a design choice meant to prevent local governments from simply raising rates to recapture lost revenue. Because local budgets were already set for 2025, the full impact of the change will first appear on 2026 property tax statements, according to Senate Majority Leader David Hogue. That delay means homeowners will not see the credit reflected in their bills until later this year, but the application period opened on January 1, 2026, as the tax commissioner announced, giving residents a defined window to claim the benefit before the new statements go out.
How the Credit Works and Who Qualifies
The mechanics of North Dakota’s program matter for homeowners trying to figure out whether they benefit. The Primary Residence Credit applies to qualifying owner-occupied homes, and eligibility extends to properties held in trusts, a detail that broadens the pool of applicants beyond individuals listed on the deed. The credit caps at $1,600 and cannot exceed the tax due on the property, so a homeowner with a $900 tax bill would see that bill drop to zero rather than receive a $700 refund. For the roughly 50,000 households whose bills fall at or below $1,600, the effect is a complete elimination of their annual property tax obligation, essentially turning what was once a recurring expense into a zero line item.
The $1,600 figure is tied directly to HB 1176, and state leaders have signaled an intent to expand credits further over time to bring more households to zero. That ambition sets North Dakota apart from states pursuing more modest relief. But the levy growth caps embedded in the law raise a practical question: if local governments cannot raise property tax rates to compensate, where does the replacement revenue come from? For now, the state is backstopping the credits with general revenues, a strategy that relies heavily on continued budget surpluses driven in part by energy-related activity. If commodity prices fall or other spending pressures grow, lawmakers could face a choice between scaling back the credit, cutting services, or shifting the tax burden elsewhere.
Colorado Opts for Caps Over Elimination
Colorado is taking a different approach. Governor Jared Polis, working with legislative leadership and a bipartisan group of lawmakers, announced a long-term plan to reduce property taxes and make the state more affordable. Rather than trying to eliminate property taxes outright, the Colorado framework focuses on targeted reductions and caps on future increases, aiming to slow the pace of growth in tax bills rather than drive them to zero. The distinction is significant: North Dakota is aiming for no annual bill for a large share of homeowners, while Colorado is trying to prevent sharp spikes that have become common as home values surge.
Colorado’s strategy reflects the political and economic reality of a state where property values have climbed rapidly in metro areas like Denver and Boulder, driving assessments higher even without rate hikes. The governor’s office, housed at the official executive residence in Denver, has emphasized affordability as a core theme, tying property tax relief to broader concerns about housing costs. At the same time, Colorado maintains a public fiscal dashboard and publishes spending data through its transparency portal, giving residents tools to see how tax changes interact with the state budget. By capping growth rather than wiping out bills, Colorado preserves a stable property tax base that local governments can still rely on, even if that base grows more slowly than in past boom years.
Sales Tax Hikes Fill the Gap
The revenue lost to property tax cuts has to come from somewhere, and local governments are increasingly turning to sales taxes to fill the hole. Knoxville, Tennessee, offers a clear example: city officials have floated a local option increase in the sales tax to fund services that would otherwise face cuts. The proposal would raise the local rate on top of the existing state base, potentially pushing combined sales tax rates significantly higher for consumers who shop within city limits. Knoxville’s plan includes a grocery exemption, an acknowledgment that sales taxes hit lower-income households hardest because those families spend a larger share of their income on everyday necessities.
This pattern, cutting property taxes while raising sales taxes, creates a direct redistribution of the tax burden. Property taxes are paid by people who own real estate, a group that tends to be wealthier and more rooted in a community. Sales taxes are paid by everyone who buys goods, including renters, low-wage workers, and people passing through a city for work or travel. When a state eliminates property taxes for homeowners and a nearby city raises its sales tax to compensate, the net effect can be a shift in who pays for local services: from asset holders to consumers. That shift is rarely highlighted in press releases celebrating property tax relief, but it is the central tension in this wave of reform, especially in jurisdictions where sales taxes are already high.
A Nationwide Pattern With Uneven Consequences
North Dakota and Colorado are not acting in isolation. According to researchers at the UNC School of Government, property tax relief and reform have become prominent topics nationwide, with many states debating or adopting changes in recent legislative cycles. The methods vary: some states are limiting assessed value increases, others are capping tax rates, and a few, like North Dakota, are pushing toward outright elimination through large credits. The common thread is that homeowners across the country have been vocal about rising property tax bills, and legislators are under pressure to respond before anger over assessments spills into broader anti-tax sentiment.
Yet the consequences of these reforms depend heavily on local context and on what other tax tools governments have available. States with diversified revenue streams, such as income taxes, severance taxes on natural resources, or large tourism economies, can absorb property tax cuts without immediately hiking sales taxes or slashing services. States and cities that rely heavily on property and sales taxes as their two main revenue pillars face a much starker choice. When one pillar shrinks, the other has to grow, or services must be cut. In regions with limited economic bases, that can translate into steep sales tax increases that fall hardest on residents with the least ability to pay, even as more affluent homeowners see substantial relief on their property tax bills.
The Missing Piece: Income-Based Rebates
Most of the current property tax relief proposals share a blind spot: they reduce or eliminate bills based on the value or status of the home, not on the income of the homeowner. A retired homeowner living on a fixed income in a modest house may benefit from the same credit as a high-earning professional in a similar property, even though the latter has far more capacity to shoulder a tax bill. In North Dakota, the Primary Residence Credit is generous and simple, but it is not targeted by income, so it does little to distinguish between households for whom property taxes are a genuine hardship and those for whom they are simply an unpopular expense. Colorado’s caps on growth are similarly broad, offering relief to homeowners across the income spectrum rather than focusing on those at greatest risk of being priced out by rising assessments.
One alternative would be to pair property tax limits with income-based “circuit breaker” rebates that kick in when a household’s property tax bill exceeds a set share of its income. That approach, used in various forms in some states, directly ties relief to ability to pay rather than to property value alone. Under such a system, lower- and middle-income homeowners would receive the most help, while higher-income households would see less or no subsidy. Crucially, income-based rebates can be designed to include renters, who often shoulder property tax costs indirectly through their rent but are typically excluded from homeowner-focused relief. Without this kind of targeting, the current wave of reforms risks amplifying inequality: affluent homeowners get large, visible cuts, while renters and low-income shoppers quietly make up the difference at the cash register.
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*This article was researched with the help of AI, with human editors creating the final content.
Julian Harrow specializes in taxation, IRS rules, and compliance strategy. His work helps readers navigate complex tax codes, deadlines, and reporting requirements while identifying opportunities for efficiency and risk reduction. At The Daily Overview, Julian breaks down tax-related topics with precision and clarity, making a traditionally dense subject easier to understand.
