It seems as if Voltaire was correct in suggesting that “it is difficult to free fools from the chains they revere.” Just last week we saw the voters in North Dakota overwhelmingly vote down the opportunity to eliminate the onerous property tax. At first glance it seems as if North Dakotans enjoy being taxed. To be fair, the proposal was more sleight of hand than tax and government reform.
Before we dive into the political and economic ramifications, a quick examination of the ballot initiative itself is in order. Known as Measure 2, the amendment would have extended the prohibition of levying taxes on property to the political subdivisions of the state. In plain English, it would have prevented the counties and cities from enacting property taxes. If they had left it at this, perhaps this proposal would not have been soundly defeated.
Politically, this was a losing proposition from the start, but for reasons which most people would probably completely miss. While on the face this initiative was designed and advocated by self-described small government and liberty activists, it actually promoted the interests of Big Government. The devil is in the details. Measure 2 continues by requiring all prior property taxes to be “replaced with revenues from the proceeds of state sales taxes, individual and corporate income taxes, oil and gas production and extraction taxes, tobacco taxes, lottery revenues, financial institutions taxes, and other state resources.”
As we can clearly see, the knee-jerk response from so many people who were cowed into believing that this measure would have placed schools, fire, and police services into jeopardy was unjustified and purely ideological drivel. The amendment would have required the full replacement of all property taxes out of the tax revenue from the State. Ultimately, of course, there would be an increase in these remaining tax forms (or perhaps the enactment of a new tax) resulting in many unforeseen economic effects. But the key aspect of this initiative which is so reprehensible for a free society is the requirement for centralization. If this ballot measure had passed, every county and city in the state would have been forced to beg for alms. Perhaps not in a year, perhaps not in five, but eventually down the road people would forget that this revenue had been originally derived at the local level and it would become an enormous source of power for the state government. We know this to be true by a simple assessment of the dramatic consolidation of power in the federal government over the years.
This leaves the big question, what would have been a better way to go about eliminating property taxes? Before we even touch on that question, is the elimination of property taxes even a good idea? From a purely economic perspective, the presence of an annual tax on the assessed value of property is equivalent to rent. History is replete with instances of families losing farms and houses because of the taxation burden. True property ownership is not contingent upon the ability to pay continually assessed taxes.
The question which seems to get overlooked throughout events such as this is how many services truly need to be provided by the government to begin with. Eliminating property taxes would be a non-issue if the various governments did not expend so much money on frivolous and wasteful programs. Perhaps the proponents of eliminating the property tax in North Dakota should have focused their time and effort on convincing people of the needless and gross extravagance of government.