Measures 1 and 2 on North Dakota's November ballot call for such significant and permanent reformation of the tax structure that passage could hogtie the Legislature and prevent meaningful property tax relief down the road.
Voters may be making a choice between lower income taxes or lower property taxes without being aware of the whole picture.
In North Dakota, the choice should be simple. Income taxes are low, and property taxes are high.
With the income tax, if you earn income, you are able to pay the tax; with property tax, you pay whether you have money or not.
Of the two, the property tax has become more inequitable with each decade. Initially, when property was more widely owned, the underlying justification of the property tax was that it was a benefits-received tax. That is hardly the case today.
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While the benefits-received theory may apply to a county property tax for roads, it has no logic when it comes to financing education. Because the ownership of property is so disparate, property owners are paying disparate shares for a governmental function that benefits all of society. And as we become more and more of a service economy, property ownership is becoming even more uneven.
The property tax is most onerous in the larger North Dakota cities where assessments have kept up with the market. Residents in every major city in North Dakota are paying about 2 percent of market value in their yearly tax bills. That's at least four times the amount these homeowners pay in income tax.
Measures 1 and 2 are based on the idea that our Legislature is full of spenders and won't be responsible in handling the $1.2 billion budget surplus. The Legislature had extra money in the most recent session and, instead of spending it, socked much of it away in a rainy day fund and other fiscal coffee cans.
If Measures 1 and 2 are defeated, the Legislature would still have the authority to put surplus money in trust funds as proposed by Measure 1, and it could still cut the income taxes as proposed by Measure 2 if it felt that was preferable to cutting property taxes. You can bet that, given a clear choice, the people would favor cutting the property tax.
The underlying issue involved in Measures 1 and 2 is trust. Can we trust the Legislature to do the right thing? The frugal orientation of the Legislature will not be changed by surpluses. It wasn't changed in the last session, and it won't be changed in the 2009 session.
With the whole state fiscal picture before it, the Legislature is best able to balance tax cuts, trust fund savings and state needs. Both measures need to be defeated.
