North Dakota Rejects Supply-Side Silliness…Wins First OTE “State of the Month” Award!

June 13th, 2012 at 11:32 am

We at OTE may bemoan the dysfunction here inside the DC beltway, but when good things happen elsewhere, we try to be all over it.

As my CBPP colleague Michael Leachman points out here, the idea that you could eliminate your property tax and make up the lost revenue through the subsequent growth–the usual supply-side, trickle-down alchemy–was soundly rejected–3-to-1 against!–by the good voters of North Dakota.

This victory for sanity was even more impressive because the state is one of the few with rapid revenue growth…

…thanks to a surge in oil production. But, as we detailed in a recent analysis, using volatile oil revenues to replace much more stable property taxes would have been highly imprudent and would have wasted the historic opportunity created by the oil boom on a strategy with little benefit to future generations of North Dakotans.

It’s notable that even in a state flush with cash, voters understood the danger in eliminating a key revenue source.  Measure 2’s failure will protect North Dakota’s future and make clear to policymakers in other states considering big tax breaks that voters aren’t buying overblown promises.

So, I’m going to give ND the first OTE “State of the Month” award, with all the privileges that entails, including free downloads of any OTE posts, graphs and tables included.  Get to work, you other 49!

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7 comments in reply to "North Dakota Rejects Supply-Side Silliness…Wins First OTE “State of the Month” Award!"

  1. PhillyCooke says:

    While I completely agree that the Supply-side arguments in favor of cutting taxes are ridiculous, I’d like to hear a deeper dive into the topic of property taxes vs. income/wealth/consumption taxes from the left. Property taxes on their face seem to encourage all sorts of behavior (such as ensuring that my children get a good education but your children don’t) that would seem to be detrimental. So, I’m not disagreeing with your point. Rather, I’m asking you to go into one aspect of the topic in greater depth.


    • Jared Bernstein says:

      Good question. Prop taxes can be regressive, but they’re generally considered a less “distortionary” tax in that they’re a tax on an immobile factor of production (distortions occur when people jump through hoops to avoid the tax—but properties don’t jump). And regressivity can be avoided by exempting property taxes for lower-income households.


  2. Rima Regas says:

    Let’s hope people vote as wisely on the national level come November! We need both houses of Congress to turn deep blue if we’re ever going to get out of the mess we’re in.


  3. Jill SH says:

    Please watch this space. NH will have the opportunity this November to approve or disapprove of an amendment to our state constitution to forever prohibit an income tax. Currently we do NOT have one. Property taxes are 65% of the tax revenue collected in this state. At the town level. No circuit breaker or homestead exemption.

    We are one of the wealthiest states in the US, with one of the lowest overall tax burdens. It’s known as the “NH Advantage.”

    But guess who pays? Clue: Don’t live in your house too long.

    And the state of things here? Well, as one example, the Tea Party legislature cut aid to state colleges and universities by 50% in the latest budget, and we were already in last place. NH higher ed students have the highest levels of student debt in the nation. Isn’t that a great prescription for economic growth?


    • Misaki says:

      18 million empty houses in the US. http://www.cnbc.com/id/41355854/Nearly_11_Percent_of_US_Houses_Empty

      How many of them are in NH? Do the owners of empty houses (the bank) have to continue to pay property taxes?

      >Well, as one example, the Tea Party legislature cut aid to state colleges and universities by 50% in the latest budget, and we were already in last place. NH higher ed students have the highest levels of student debt in the nation.

      Maybe the legislature is deluded into thinking that “a poor economy” means that there aren’t enough rich people. (http://www.gallup.com/poll/147881/americans-divided-taxing-rich-redistribute-wealth.aspx)

      A property tax theoretically discourages inefficient use of land without high land prices that encourage speculation… I think. (In other words the state benefits instead of private individuals.) The state can then use this money to help lower-income households or whatever else it feels like. If it means unemployed people can’t own a house, well… wouldn’t it be smart to support policies that raise employment then!

      Job creation without government spending, inflation, or trade barriers: http://jobcreationplan.blogspot.com/


  4. john says:

    Many North Dakota towns are struggling to deal with the issues caused by the oil boom. Schools and services are hit particularly hard. And, employers have to compete with high-paying oil field jobs. So, good see them not cutting revenues right now.


  5. bakken says:

    I was glad to see the fine folks of North Dakota not voting to abolish property taxes. I can’t imagine that would have been anything but a disaster. They’re having enough trouble getting funding where it’s needed as is.


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