Leaders From Two of North Dakota’s Largest Communities Blast Tax Incentives in Letter to Lawmakers

Fargo City Commissioner Tony Gehrig, left and Mayor Tim Mahoney listen to a discussion. Forum file photo

A letter is being circulated by lawmakers in Bismarck as they consider reining in certain economic incentive programs.

Most local leaders, I’m told, have been hostile to that effort. But at least two, the authors of the letter in question, feel differently.

Fargo City Commissioner Tony Gehrig and Bismarck City Commissioner Steve Marquardt blast the “unjust and unsustainable tax system” created by these incentives.

“When government picks winners and losers, all taxpayers lose,” they write in the letter which was dated January 23. They also accuse local leaders of overusing incentive programs. An excerpt:

The full letter below is worth your time to read.

Lawmakers spent the interim scrutinizing tax incentive programs. The Political Subdivisions Taxation Committee had, among its duties during the interim, a charge to “study the analysis of economic development tax incentives.” Rep. Jason Dockter, who chairs the committee, said the review was unprecedented.

“This is the first time since incentives started that we’ve taken a look at them,” Dockter told me back in August. Their work was badly needed. Dockter told me at the time the committee had already passed proposed legislation for the 2017 session which would end four incentives currently in statute – once since the 1960’s – which have never been used.

“It’s pretty unbelievable,” he told me. Lawmakers are also considering other legislation to limit incentive programs like Renaissance Zones and TIF (tax increment financing) Districts.

You cannot say that the benefits outweigh the costs when the costs weren’t necessary to begin with.

But it’s not just that state laws are crowded with incentive programs that aren’t used, or are rarely used. It’s that the whole notion of tax exemptions is, in and of itself, a dubious sort of policy.

Commissioner Gehrig has become somewhat famous (or infamous, perhaps, depending on your perspective) for greeting each request for a tax incentive in his city with a question for those requesting it: “Would you be building this if you didn’t get the incentive.”

Depressingly, the answer to that question is often “yes,” meaning that local taxpayers are shouldering the burden for an incentive that isn’t strictly necessary.

The proponents of these incentives often tell us that the benefits outweigh the costs. That the aggregate tax revenues generated by some new business or facility are much greater than the revenues lost to the exemption.

But that sort of cost-benefit analysis is invalid if the project would go ahead without incentives. You cannot say that the benefits outweigh the costs when the costs weren’t necessary to begin with.

I don’t think North Dakota will ever be rid of economic development programs. I’m not even sure we should be rid of them entirely. But I hope lawmakers narrow their scope dramatically, because as it stands now it often seems as though local leaders aren’t stimulating economic growth so much as doling out free taxpayer-funded gifts to companies which don’t really need them.

Here’s the full letter:

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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