Tuesday, May 31, 2011

WOULD MEASURE 2 BE AN INCENTIVE FOR INDUSTRY TO LOCATE IN NORTH DAKOTA?

We know that tax and regulation plays a significant role in business decisions.  We also know that all taxes and regulations are a disincentive to production.  We know government can provide significant services and benefits necessary for an orderly and prosperous society.  Taxes are the tool government must use to provide the services and benefits.

The question isn’t whether or not we should or shouldn’t have government and taxes.  The question is which taxes will do the least harm to our overall economic wellbeing while allowing government to best perform those services that facilitate a healthy and prosperous community.

WHAT’S ECONOMIC DEVELOPMENT & WHAT DO PROPERTY TAXES HAVE TO DO WITH IT?

Creation of jobs - good, private sector, long lasting, well paying jobs is how many describe the purpose, if not the goal, of economic development.  It’s important to consider what it is about jobs that link them to economic development or vice versa. 

Jobs are how individuals earn so they can exchange for goods and services they need or want.  The more one earns the more goods and services he can access.  Likewise, the more job options on has the more likely he can maximize what he earns.  What we earn determines our standard of living. 

Anything that:
1.      Limits our access to job options, or
2.      Reduces (i.e. takes what we earn) our ability to spend our earnings as we see fit, diminishes our standard of living.
  
Individuals, not government create jobs.  Jobs are the critical ingredient which determine our standard of living.  Government can play an important part in facilitating job creating.  However, government’s role must be limited and remain so. 

IF TEMPORARY ABATEMENTS, ENTERPRISE ZONES, TAX INCREMENT FINANCING ETC. ARE GOOD, WOULDN’T PERMANENT ONES BE JUST AS GOOD – EVEN BETTER?

Public economic development entities routinely use grants, loans, loan guarantees and “free” infrastructure to induce industry to locate in their jurisdictions.  Abatement of and/or manipulation of property taxes is widely used to lure industry.

Property taxes provide a whole host of creative ways for government to provide tax breaks only available to very few privileged property owners.  They include outright abatement, kick backs of property taxes (Tax Increment Financing – “TIF”), and creation of Economic Enterprise Zones (EEZ).  The EEZ’s abate property taxes for those whose property falls in the zone provided they meet established criteria.

Economic development entities realize that property taxes are a significant impediment to economic growth and business prosperity.  In North Dakota the average property tax imposition is 1.42% of assessed property value.  For many businesses, property taxes can exceed the profit the business generates.  Thus, property tax strips the business owner of necessary capital needed to maintain a viable business and grow.

For example a building in Minot valued at $5.8 million dollars is assessed more than $100,000 annually in property tax.  While the tax may enhance the local jurisdiction’s revenue, it makes it difficult for that business to fund growth.  Property taxes are assessed regardless of whether or not the business makes a profit. 

Because of the harsh financial impact of property tax on business, government bodies realized reducing or abating them has a positive influence on business viability and success.  Most exemptions, whether abatements, TIF kickbacks or Enterprise Zones, last for only short periods - usually in the 3 to 7 year range.  Some are shorter and some longer.

We now have extensive history showing the impact of these economic development programs.  The conclusions are sobering.  In the short term they attract business activity.  Over the longer term the positive impacts are limited and short lived. A significant number of businesses attracted by these incentives either fail or once the incentives end, move to the next community offering incentives.  Instead of creating viable jobs these programs create incentive seekers or more accurately welfare addicted business.

For those serious about attracting and retaining thriving, prosperous and growing businesses, there are some valuable lessons to be learned:

1.       Temporary incentives provide temporary economic impacts.

2.       Temporary incentives increase the tax burden on all other properties, negatively impacting the ability of  home owners to retain the capital needed to remain successful and/or grow.


SUMMARY
Economic development corporations have attempted to attract business by offering incentives.  Property tax relief and outright grants have proven the most potent inducements.  Property tax relief is particularly effective for encouraging business to invest in property improvement and upkeep. 
However, temporary relief provides only temporary benefits and only to those receiving them.  All other taxpayers are negatively impacted.  Often, once the incentives end the recipients either fail or move on.  

Abolition of property tax is the most potent way to keep capital in the hands of those who create jobs.  Likewise, property taxes are the surest way to starve business of the capital necessary to grow and remain viable. 

Permanent abolition of property taxes for everyone will not only stimulate growth it will stabilize the long-term viability of our communities.

REPLACE PROPERTY TAXES

1.       YES! – It can be done and we can do it on June 12, 2012 by voting YES on Measure 2 and guarantee that essential government services are fully funded.

2.      Measure 2 will, for the first time in State history, constitutionally give local control over all local spending and the portion of school revenue currently funded with property taxes.

3.      WHY SHOULD ANYONE IN A FREE COUNTRY BE FORCED TO RENT THEIR HOME FROM THE GOVERNMENT OR LOSE IT?  It’s time citizens have security in their own home and don’t have to rent from the government or lose it.  After paying a mortgage for 20 to 30 years why should we continue paying “rent to the government” for the “privilege” of living in our home?  We shouldn’t. 

Monday, May 30, 2011

Would Measure #2 be an Incentive for Industry to Locate in North Dakota

We know that tax and regulation plays a significant role in business decisions.  We also know that all taxes and regulations are a disincentive to production.  We know government can provide significant services and benefits necessary for an orderly and prosperous society.  Taxes are the tool government must use to provide the services and benefits.

The question isn’t whether or not we should or shouldn’t have government and taxes.  The question is which taxes will do the least harm to our overall economic well being while allowing government to best perform those services that facilitate a healthy and prosperous community.

Property taxes are the most harmful and least positive means of raising revenue.  Study after study confirms this.  We have found no study or argument, whether philosophically or economically based, contending property taxes produce more good than harm compared to any other tax.