Research organization says Measure 2 ‘risky’

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An official from The Center on Budget and Policy Priorities called Measure 2 “a very risky and highly imprudent experiment” on Tuesday.

Measure 2, which would amend the North Dakota Constitution to abolish property taxes if a majority votes in its favor, will be voted on by North Dakota residents on the June 12 primary ballot.

The Center on Budget and Policy Priorities, which is a nonprofit, nonpartisan research organization and policy institute based out of Washington, D.C., has previously conducted research on a number of government policies and programs at the state and federal levels across the country.

“Measure 2 would lock North Dakota into a course of action that is uncharted and risky,” said Michael Leachman, co-author of the center’s new report “North Dakota’s Measure 2: High Risk for Little Reward” and the center’s director of state fiscal research. “No state has ever placed a constitutional ban on property taxes and property taxes have funded North Dakota since it entered statehood in 1889.”

The report and the center’s research are funded primarily by foundation grants and the center elected to study Measure 2 because of its potential impact.

“This proposal simply drew the attention of our organization,” said Nick Johnson, the center’s vice president of state fiscal research.

Leachman, who presented the center’s findings during a conference call Tuesday, listed several dangers posed by Measure 2.

“You can’t just get rid of property taxes without a major disruption to local services,” he said. “Locking a ban on property taxes into the state constitution would make it especially difficult for the state to sustain funding for local services in the face of changing economic conditions.”

However, the idea that that this would be “locked in” is inaccurate, according to Keith Colville, Jamestown/ Valley City region chairman of Empower the Taxpayer, who was contacted for comment after the conference call.

Empower the Taxpayer is a nonprofit coalition in favor of passing Measure 2.

“That claim is false,” he said. “If it ultimately doesn’t work, all the Legislature would have to do is draw up a new measure and have the residents vote on it.”

Permanently shifting funding for schools from property taxes to oil revenues would leave the education system subject to a volatile industry, Leachman said. He pointed to statistics the center researched as part of its report.

“Since 1994, the actual revenues from the oil industry versus the projected revenues have been off by an average of 33 percent, and by as much as 60 percent in some cases,” he said. “Oil revenues can fluctuate greatly depending on factors beyond North Dakota’s control.”

Colville refuted Leachman’s argument, stating that Measure 2 was written well before the oil boom hit North Dakota.

“This measure was written years ago and didn’t even account for oil revenues, rather relying on economic development to replace those $800-plus million of funds lost from abolishing property taxes,” he said.

Leachman also pointed to the benefits of property tax deductions from North Dakota residents’ federal income taxes.

“North Dakota would have sent $31 million more to the federal government through federal income taxes in 2011 if Measure 2 had been in effect last year,” he said.

The state Tax Department said Measure 2 would eliminate $812 million in property tax funding annually starting this year.

Regarding the claim that eliminating property taxes would influence companies to expand in North Dakota or would influence out-of-state businesses and landowners to flock to the state, Leachman said it would likely have little impact.

“Property taxes only represent about 2.3 percent of average business expenses, so it’s not as though passing Measure 2 would mean companies will all of the sudden be flocking to North Dakota,” he said.

Colville disagreed. He said that for the past 10 to 15 years, economic development corporations have been pushing to abolish property taxes to encourage business.

“All these years we’ve heard from economic development corporations in cities all over the state saying that abolishing property taxes will entice businesses, corporations and landowners to come into our state and now they’re saying otherwise,” Colville said. “The reality is that Measure 2 passing will encourage greater economic development.”

Alternatives were proposed during the conference call, including investments in education and what Leachman called “fundamental areas.”

“Sixteen percent of children in North Dakota are in poverty — the state should be using funds to invest in those children’s education,” he said. “The state should also invest in fundamental areas like roads, job training, communication systems and agricultural systems.”

Leachman said every other state in the country would love to be in North Dakota’s current fiscal situation and he sees no point in locking into a state constitutional measure such as this.

“If you want to lower property tax, that’s fine, but don’t lock it into the state constitution,” he said. “Constitutions are hard to change, and the state could not easily restore property tax funding when other revenue sources decline.”

Colville said that North Dakota has been a cutting-edge leader in this country for years, so he sees no reason for people to fear an unprecedented abolishment of property taxes.

“Just look at The Bank of North Dakota, for example. We’re the only state in the country with a state-owned and operated bank, yet that was unprecedented at one time,” he said.

He said that the idea that this is an ill-conceived measure is not true.

For more information about The Center on Budget and Policy Priorities and its findings, visit www.cbpp.org.

For more information about Empower the Taxpayer, visit http://empower thetaxpayer.org.

Sun reporter Brian Willhide can be reached at 701-952-8454 or by email at bwillhide@jamestownsun.com

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