CBPP Urges Keeping Tax Dollars Away From the Feds

May 18, 2012

On June 12, North Dakota voters will decide whether to abolish property taxes in their state. Measure 2 would, depending on the perspective, be an $800 million blow to essential government services or merely the latest of a long string of sensible taxpayer restraints on property taxation in the footsteps of California's Proposition 13, Massachusetts's Proposition 2-1/2, and recent property tax caps in Indiana, New Jersey, and New York. At minimum, if it passes, it will be another example of the ability of each our fifty states to try different policy ideas and see what works and what does not.

Not surprisingly, the Center on Budget and Policy Priorities (CBPP) attacked Measure 2 this week, arguing that it would undermine dedicated funding for local services, make the state dependent on oil revenues, and eliminate a tax that no one else has eliminated. One strange argument jumped out at me though:

Measure 2 Would Send North Dakota's Money Out of State

Measure 2 would send a substantial amount of North Dakota's money out of the state, rather than keeping it in-state to improve the state's quality of life or economy. This makes little sense. North Dakota is at a key moment in its history; to take full advantage of the quality-of-life gains oil has made possible, the state should maximize the share of North Dakota's money that stays in North Dakota.

Under Measure 2, North Dakotans would pay more to the federal government than they otherwise would. Since taxpayers who itemize can deduct property taxes on their federal income tax returns, banning such taxes would increase the tax payments North Dakotans send to the federal government.  Most of this money would go to support federal programs throughout the country, rather than funding local needs as the property tax does. 

If Measure 2 had been in place last year, North Dakotans would have paid the federal government about $31 million more in federal income taxes for 2011.  Taxpayers who itemize would see their federal income taxes increase by about 18 cents for every $1 in property tax reductions they receive under Measure 2 . . . .

By rejecting Measure 2, North Dakotans can choose how to use oil revenues and other revenues to strengthen the state's economy in ways that reserve the benefits for the state's residents to the maximum degree.

In other words, CBPP urges North Dakotans to reject Measure 2 because they'll be better off keeping their own money in the state rather than sending it to Washington, D.C. Although the facts they cite are tenuous—the tax cuts North Dakotans will receive under Measure 2 greatly exceed any extra federal taxes—it's hard for me to argue with their reasoning. Glad to see CBPP finally recognizes that tax dollars are better off in people's pockets rather than with Uncle Sam!

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