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Brett Narloch, Published April 24 2012

End tax, economy will grow

There are legitimate questions surrounding the Measure 2 debate. How will the city budget process work if it passes? Can the system really be reformed without eliminating the tax? Will local governments lose control?

I want to focus attention on the economic impact of eliminating property taxes on North Dakota’s economy. I run a public policy think tank in Bismarck. It’s our mission to educate citizens about the biggest policy issues of the day. Measure 2 rises to that level.

What would happen to North Dakota’s economy if property taxes were eliminated? Intuitively we know a $750 million per year tax cut would help the economy. Families and businesses would have more money to spend and invest, creating thousands of jobs and increasing disposable income, raising our standard of living. That’s something that is unquestioned in conservative and Republican circles.

But thanks to the Beacon Hill Institute at Suffolk University (Boston), we can more accurately predict impact. They have created an economic model that adjusts things like overall private investment, job creation, disposable income and other variables by tinkering with tax revenue figures. The model seeks a supply and demand equilibrium. The North Dakota Policy Council approached BHI about Measure 2, and they agreed to conduct a study for us. We changed property tax revenue to zero dollars, and the model predicted what would happen.

In 2013, private employment would increase more than 13,000, private investment would increase nearly $1 billion, and real disposable income would increase $1,430 per capita ($5,720 per family of four). Because these increases would be above the projected baseline, it already takes into account the oil and agriculture boom, meaning this would all be in addition to that forecasted economic growth.

So the economic benefits of eliminating property taxes in North Dakota would be tremendous. In fact, the authors of the study left us with this statement: The positive benefits to the private sector of the state’s economy brought about by eliminating property taxes are without question.

Government leaders have spent a decade or longer trying to diversify North Dakota’s economy.

Eliminating property taxes would seem to solve that problem. According to the institute, "the absence of property taxes would cause investment to become more attractive in the state of North Dakota, with an increase in investment of $980 million in 2013 - both from businesses located inside and outside North Dakota."

Many of those businesses will be outside of the two industries that North Dakota relies on so heavily (agriculture and energy), thus diversifying our economy and getting us away from the boom-and-bust cycles that have been such a big part of North Dakota’s history.

Perhaps the best thing about the institute is their commitment to factual analyses. Their credibility on matters of tax policy is second to none. In fact, the North Dakota Department of Commerce, North Dakota State University and numerous economic development corporations have cited their work.

The North Dakota Policy Council is a non-partisan, 501(c)3 organization and is prohibited from supporting or opposing ballot measures, thus we do not have a dog in this fight. And debating the future funding formula for local governments and matters related to local control are important and should continue. But we cannot ignore the economic consequences of eliminating property taxes. And those consequences would be good. Read the study at www.policynd.org.

Narloch is the executive director of the North Dakota Policy Council.