Charles Crane/MDN Rep. Ben Koppleman of West Fargo and economist John Phelan listen as Rep. Scott Louser of Minot answers a question from attendees at the Crush ‘N’ Cap presentation held Thursday at the Knights of Columbus building in Minot.

Dozens of Minot residents and property tax repeal advocates gathered at the Knights of Columbus Building in Minot on Thursday, August 8, for a presentation calling for the elimination of the income tax and the imposition of caps on local government spending.

The “Crush ‘N’ Cap” – Translation and lyrics, lyrics, song lyrics The presentation was given by John Phelan, an economist with the Center for the American Experiment, a think tank based in Minnesota. Phelan presented his economic analysis of North Dakota, which he said lagged in the years following the year before the COVID-19 pandemic, with federal policies focusing on the inherent “Economic Geography” of the state. Phelan highlighted North Dakota’s gross domestic product, which is dominated by oil and natural gas production. Phelan shared data showing that the natural resources sector in the state shrank by 23.3% between 2019 and 2023.

“North Dakota is one of only four states whose economy is still smaller than it was in 2019, the year before the pandemic,” said Phelan. “In 2023, it will actually be two percent smaller than it was in 2019. That’s essentially why we thought about North Dakota and the opportunities you can have there.”

Phelan identified regulatory policy and fiscal policy as two areas in which state government can influence a state’s economic performance, focusing specifically on taxation and government spending.

Although he did not admit “magic button” exists that immediately revives an economy, Phelan said states that have eliminated the state income tax are far better off than even states like North Dakota, which generate relatively little income tax revenue. Phelan cited studies showing that states without an income tax experienced economic growth and attracted more residents. When asked during the question-and-answer portion of the presentation whether eliminating the income tax in North Dakota would be worth the effort, given its low tax rates, Phelan replied that if there was a “Symbol tax” you might as well get rid of it.

Phelan then looked at data on nominal and real increases in median annual income compared to the property tax burden, which led to the proposal’s second point about limiting local government spending. Phelan said housing prices have skyrocketed in North Dakota in recent years, which in turn has increased the local tax burden on homeowners.

“I think the solution is to adjust all local spending to the annual rate of inflation. You have to pay for local services, but the amount of taxes you pay should be tied to the rate of inflation of those services. It should not be tied to what the Federal Reserve is doing with a printing press.” Said Phelan. “If inflation rises by two percent a year, prices rise by two percent a year, government spending doesn’t rise, and your taxes don’t rise.”

Phelan said there will continue to be mechanisms for municipalities to propose tax increases to voters through a referendum when they are needed for projects such as schools, maintaining a link between the provision of local services and the payment for them.

North Dakota Reps. Scott Louser of Minot and Ben Koppelman of West Fargo participated in a question-and-answer session with Phelan following the presentation, during which they outlined what legislation they are preparing for the next legislative session if voters reject the property tax repeal measure in November. Koppelman acknowledged that his proposal would be moot if the measure passes, but wanted to avoid rushing to close the loophole.

“I think with the property tax measure, we don’t have to think about whether we support it, because I think many of us do. We can’t control how a vote goes, so what if it doesn’t pass? There have been some similar parallels in the past where a measure didn’t pass and there wasn’t enough time to develop a proposal for property tax relief or reform.” said Kopplemann. “We need to address the alarming situation we have, especially with our homeowners and property taxes. We need property tax relief, and we need it now for the primary residents of our state.”

Koppelman proposed a property tax reduction of 80-90% for primary residence owners through a property tax credit and a reform of the property tax on residential and commercial properties based on the physical characteristics of the property. Koppelman said by having local governments base the assessment on square footage, “We would be on equal footing.”

“How many square meters does our building have? How many square meters does your property have? Does it really matter if your house was built in 1960 and mine in 2020 and we both need the same police, fire protection and roads? I don’t think so,” said Koppelmann. “Why should we tax me or you more depending on whether we make it pretty? If we continue to penalize fixing and improving things, then we’re going to need more economic development and more Renaissance-style stuff to repair the damage we’ve done by reverse-promotion in the current system.”

Louser outlined the bill he is drafting for the next session that would require the state to pay the mandated $60 mills needed to fund general education. The second element of Louser’s bill is a cap on local political grants to the balance of property taxes to a 3 percent increase.

“The 60 mill buydown would cost $680 million per biennium. We collect a little less than $340 million per year from 60 mills. In Minot, that would reduce the school portion of your property tax by about 48% and overall by about 26%.” Said Louser. “The bond we passed for Minot North would stay local, so all of those local decisions would stay local.”