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The North Dakota House voted down HB 1326 yesterday, a property tax reform bill that cuts down on corporate welfare giveaways.

ND House defeats property tax reform bill

Yesterday, the North Dakota House of Representatives voted against HB 1326, the tax bill that Managing Director of the North Dakota Watchdog Dustin Gawrylow calls “a critical piece of pro-taxpayer reform that can and should be the beginning of real property tax reform” in North Dakota.

The basic premise of the bill:

Every political subdivision shall have an affirmative control over its own tax base and its own tax revenue. No political subdivisions shall dictate to other political subdivision(s) without the expressed consent of each governing power.

But what does this really mean? For starters, Gawrylow’s support for the bill stems from the idea that citizens should not give our city commissioners so much centralized power.

Currently, the city has “a dictatorship” over tax revenue, Gawrylow explains. It has the sole ability to give away tax exemptions to corporations, investors, and developers without permission from anybody else. But if they want to give away the school’s or the county’s money, those entities have no say in where that money goes. HB 1326 would have given schools and counties a chance to be responsive to their taxpayers and voters in questioning why they are giving away revenue when many schools are saying there isn’t enough revenue, said Gawrylow on Valley News Live Feb. 13.

It’s really because they don’t have the mechanism to hold the city accountable to these tax exemptions and really represent their own voter base.

Opposition to HB 1326

In Fargo, Commissioner Dave Piepkorn, Chair of the Tax Exempt Review Committee, argued that businesses don’t come to Fargo because there are customers or demand. They do it because the city offers freebies.

We’re in competition all day every day, so if we weren’t doing this, if we decide to stop doing this, it would have catastrophic economic impact on our city. If you think a lot of businesses come here just because we’re nice, that’s not how it is. That’s naive.”

But Gawrylow argues that right now, tax exemptions are distributed to specific projects the city wants to develop, virtually robbing those taxes from the school, parks, counties that would have received that tax revenue. HB 1326 would have required schools and counties to vote in favor of exempting property for tax purposes whenever incentives or exemptions lead to a loss of tax revenue.

What we want to do is we want to give schools, counties, parks, everybody in the local government system its own control over its own revenue and its own financial future. That’s the only way that we will be able to minimize these exemptions and their impact on everybody else because when some people and some businesses don’t pay their fair share, everybody else pays more.

Like Peipkorn, those who voted against the bill argue that HB 1326 would have curbed economic development efforts, and cities would lose potential business and further revenue down the road. However, cities would still have the ability to give away exemptions of their own tax levy, even if it would not be able to speak for schools and counties.

Gawrylow leaves us with one last thought: Why should cities dictate to schools and counties regarding their revenue, just so that the state can fund schools and counties at a higher level?

What’s next?

While the defeat of the property tax reform bill in the House leaves those in support of it frustrated and wondering what’s next, the Senate will address some of the same issues in SB 2166, which deals primarily with the overlap of Renaissance Zones and Tax increment Finance Districts. However, pending arguments will likely include some recourse to political subdivisions unhappy with city policy on tax exemptions and corporate welfare giveaways. We’ll have an update of that bill and its effects on North Dakota taxpayer money coming shortly. Stay tuned!

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