Crush ‘n’ Cap

Join American Experiment North Dakota’s two-part campaign to eliminate the state income tax and limit local government spending increases to the rate of inflation each year.

Eliminating the state income tax will force the North Dakota legislature to cut spending to replace the $1.256 billion they currently receive from our paychecks.

North Dakota should join the eight other states with no income tax.

It’s the spending, stupid!

Instead of shifting the burden for local government spending to the state, we should cap local spending at the rate of inflation each year.

Sign the petition!

More Resources:

January 18, 2024: County wants Grand Forks to stop providing syringes to drug users

December 6, 2023: Voters reject $140 million Fargodome expansion

October 5, 2023: Fargo imposes sharp tax hike, brushing aside citizen concerns

June 15, 2023: City hall knows Fargo has a noise problem but blows $40,000 on study anyway

February 8, 2023: Fargo drops ‘bridge to nowhere’ due to overwhelming taxpayer opposition

December 20, 2022: Questions over costly extras for $13 million Fargo-Moorhead dispatch center

October 31, 2022: Proposed $6-11 million pedestrian bridge riles up Fargo taxpayers

Op-Ed: “Crush the income tax, cap local government spending

John Phelan, economist | May 7, 2024

Signatures are being collected for a constitutional amendment to abolish property taxes in North Dakota. The idea is superficially appealing — who wouldn’t vote to get rid of a tax? But like many debates on taxing and spending, the solution here focuses on the revenue side instead of the spending side, which is a mistake. Eliminating the property tax, or in this case freezing the tax amount at 2025 levels and backfilling with state funding, will not get at the root evil in state and local government: spending.

Bill Clinton’s famous slogan for his 1992 presidential campaign was “It’s the economy, stupid.” Today’s version for North Dakota should be: “It’s the spending, stupid.” If legislators, county commissioners, school board members and mayors don’t rein in their spending, it won’t matter which revenue source they employ. The focus has to be on spending. This is why American Experiment North Dakota launched the Crush N Cap campaign to eliminate the state income tax and cap increases in local government spending at the rate of inflation.

Crush the Income Tax

There are two reasons North Dakota should join the ranks of states without an income tax. First, the lack of an income tax is a great marketing tool to attract businesses and workers to the state. States like South Dakota flaunt their no-tax status in marketing campaigns across the United States, and especially in Minnesota. South Dakota recently launched a video featuring Gov. Kristi Noem promoting the state where she states: “South Dakota is the freest state in the nation, we have no state income tax, and we offer apprenticeship training so you can get to work.”

North Dakota will struggle to attract people to the state with our climate — we need every tool available to grow the workforce and economy. There are currently eight states in the country with no state income tax and the list is growing every year. North Dakota needs to join this list.

Second, eliminating the income tax would place much-needed downward pressure on state spending. Even with Republican leadership, the state budget has grown from $14.1 billion in 2013-15 to $19.6 billion in 2023-25, a 38.6% over a period (2014-2023) when the state’s Gross Domestic Product has increased by 23.7%.

Eliminating the state income tax will force the North Dakota legislature to cut spending to replace the $1.256 billion they currently receive from our paychecks. In their effort to replace the property tax with state appropriations, our friends at EndthePropertyTax.com have some very good suggestions for how to cut $2 billion in state spending. We propose using the same spending reductions to replace the revenue currently coming from the income tax.

Cap Local Government Spending

The focus on changing how local governments get their revenue is misplaced. If you replace the property tax with a state appropriation, counties, school districts and cities will simply find another way to get the money they think they need to run government. The focus has to be on spending, which is why we propose capping all local government spending growth at the annual rate of inflation. The most commonly used inflation rate is the Consumer Price Index (CPI). The Federal Reserve is mandated to hit a 2% target, notwithstanding the current spike in inflation caused by pandemic overspending and Bidenomics.

Right now, property taxes are based on the value of your house or property, so as valuations increase, your property taxes increase. This system rewards local governments with new revenue based on the real estate market, not their actual needs to run the school district, county, or city. The property tax repealers propose to replace this revenue with a block grant each year from Bismarck. That will create a system where those spending the money (local government officials) will be disconnected from those providing the revenue (state legislators), causing an endless blame-game over who’s really responsible for low test scores or even poorly plowed streets.

With an inflationary cap on local government spending, it will be clear to the public who to hold accountable for schools, parks, and streets. The people paying the bills are certainly limited by inflationary pressures at their kitchen tables, why shouldn’t local government officials be held to the same standard?

As with the property tax repeal proposal, local governments would also have the option to ask voters for more revenue to respond to an emergency or special project request using the referendum process. A true emergency or need will certainly enjoy the support of a majority of taxpayers, and they will feel gratefully empowered by the opportunity to cast a vote. 

Our Crush N Cap proposal builds on the momentum in North Dakota to rethink how we pay for government services. In addition to the campaign to repeal the property tax, a recent proposal from Rep. Scott Louser of Minot seeks to cap local government spending at 3% per year. We applaud his attempt to control spending through the legislative process, instead of a permanent and inflexible constitutional amendment.

We elect leaders at the state and local level to make tough decisions about taxing and spending. Crushing the income tax and capping local government spending will give taxpayers the tools to hold them accountable.