By: Bob Lucore
As a sparsely populated state, North Dakota does not garner lots of national attention. However, the people of North Dakota deserve the nation’s congratulations for an action they took at the ballot box last week.
By a three-to-one margin, North Dakota’s voters rejected a measure that would have changed the state’s constitution to permanently ban the use of property taxes to fund local governments. By doing so they have rejected the free-lunch, voodoo economics of those who promise that severe tax cuts lead to all sorts of magic, including higher tax revenues.
Property taxes in North Dakota provide 45% of the funding for public schools, 30% of county services such as criminal justice, and 15% of city services such as firefighting, police protection, street repairs, sewer maintenance, public health, and library services. About one-fourth of all state and local tax revenues in North Dakota come from property taxes.
Proponents of the tax cut measure tried to convince the voters that cuts would pay for themselves by stimulating growth. Some said property taxes could be replaced by revenues from the booming oil and gas industries.
North Dakota is somewhat unique among state governments right now. It has weathered the recession quite well because of rapidly expanding energy extraction in the state, and tax revenues related to oil and gas.
Fossil fuel extraction is an industry subject to severe booms and busts. Therefore taxes from the energy boom may be flowing in now, but when demand slackens, or the oil and gas runs out, tax revenues will undoubtedly fall precipitously. Property taxes, on the other hand, usually provide a very stable source of revenue, moving up and down a lot less erratically. So relying on oil and gas tax revenues would have put North Dakota’s schools, public safety and other vital services at great risk.
Of course it also would be sensible not to rely on an industry that depends so heavily on federal subsidies and contributes heavily to global warming though increased greenhouse gases.
This is not to say that property taxes are ideal. They can often be more regressive than income taxes—though they are usually much more progressive than sales or excise taxes. It is likely that the state legislature will deliberate on ways to improve the tax system in the near future.
It is good news is that North Dakotans were not taken in by the supply-side hucksters who are traveling about the country promoting tax cuts. The policies these snake-oil salesmen peddle would undermine our states and our nation. With adequate revenues, we are able to act together to address shared problems such as education, public health, public safety and transportation infrastructure, and to build a better future together.
Bob Lucore, a long-time ADA board member, is the former Director of Research and Policy for the United American Nurses and has worked for the Teamsters and the Department of Economic Research at the AFL-CIO. He taught economics for several years at Centre College and Colorado State University and is currently studying Library and Information Science at San José State University. Bob is a member of UAW Local 1981, the National Writers Union.Back