Ballot Initiative Update: ND Income Tax Cut

This past week, 15,677 signatures were filed with the North Dakota Secretary of State's office for the Income Tax Cut Inititiave. Sponsored by the North Dakota chapter of Americans for Prosperity, the initiative, if certified for the November ballot, would slash North Dakota's state corporate income tax rates by 15 percent and the individual income tax rates by 50 percent starting in 2009.

Apparently, North Dakota exepcts a budget surplus of anywhere between $700 million to $1 billion next year, so supporters of the initiative are looking for both tax relief and restrained government spending during these "sunny days." Smart!

But the AARP is opposing the measure because "it would hamper state and local governments’ and school boards’ ability to respond to emergencies or shifting priorities in the future." The North Dakota Farm Bureau is also opposing the measure citing "worries that it would place the burden of spending on increased property taxes." Now maybe North Dakota should start a government "rainy day fund" that is concomitant with this tax cut, but it's amazing what poor excuses are made to not cut taxes. (But I invite any North Dakotans to explain why voting Yes on this inititiave would be a bad idea.)

This will be the second income tax related ballot initiative this year, joining the Massachusetts Income Tax Repeal. While well intentioned, the Massachusetts initiative is a bit extreme as it would completely get rid of the 5.3% tax on wages.

With so much focus on the national economy during this presidential election cycle, there has been a lot of emphasis on the candidates' tax and economic growth policies. Folks in the broader national conservative movement need to realize that not only do local and state taxes have just as much of an effect on the economy as national taxes do; state and local tax, budget, government transparency, and other localized bread and butter issues can help build our farm team, as previously discussed.

The Tax Foundation just completed a report that looks at local income taxes in major metropolitan areas around the nation. They found that those taxes usually cluster around places with poor business and investment climates:

"Among the states with extensive local-level wage and income taxes are Indiana, Kentucky, Maryland, Michigan, Ohio, and Pennsylvania. With the exception of Indiana, each of these states were in the bottom half of the country in the Tax Foundation's 2008 State Business Tax Climate Index. Indiana, Michigan, and Pennsylvania also are among the ten states with the most outbound moves according to United Van Lines's 2005 Migration Study."

We should not have the image of being rabid simpletons who are completely anti-tax. We have to figure out a way to communicate a message that says that we should be cautious when implementing a tax, that tax policy should be based on long term standards, not short term political cycles. I haven't come to a decision on the Flat Tax vs. Fair Tax debate (maybe some of you can convince me one way or the other), but the Tax Foundation has a good set of principles when it comes to taxes: "simplicity, transparency, stability, neutrality, and growth-promotion." Every tax policy, local to federal, should go through these five tests.

Furthermore, discussion at the local and state level about tax policy is a great way to merge the netroots with the grassroots of the future conservative movement. The 1040 form has become an institution in American society, and grumbling on federal taxes is pretty quiet. But on the streets, especially where I live, the grumbling is much louder when it comes to local and state taxes, especially from homeowners who are paying onerous and unpredictable property taxes and business owners who are paying outrageous gross receipt taxes.

Bottom-up fiscal conservatism seems to be working in North Dakota. And the sponsors of this initiative should be especially proud of themselves to have the courage to call for income tax cuts during periods of high revenue. Let's take this to other city halls and state capitols around the nation.