Bully for North Dakota voters. Their willingness to keep paying property taxes on their homes, farms, cabins and business real estate, expressed by a hefty majority in Tuesday's election, spared Minnesota policymakers from what would have been a major headache.
Minnesota property taxes have been rising at a politically uncomfortable pace for the last decade. They rank 20th in the nation in the most recent comparision, from 2009, compared with North Dakota's 29th-place rank. Especially outstate, Minnesotans are already calling for relief. Those calls would be much louder today from northwestern Minnesota if the cross-border competition had decided to take their version of relief all the way to zero.
To be sure, had the referendum outlawing property taxes passed, North Dakota lawmakers would have been obliged to replace at least some of more than $800 million in lost property tax revenue, likely with higher sales or income taxes. Those adjustments might have worked to Minnesota's competitive advantage. For example, North Dakota's state sales tax rate could have risen from its current 5 percent to something in excess of Minnesota's 6.875 percent rate, inviting more consumers to shop on the Red River's east bank.
But decisions about where to locate businesses and buy homes are much affected by property taxes. Future development in Moorhead and East Grand Forks would have been greatly at risk if a property tax revolt had carried the day in the Peace Garden State. Minnesota would have been hard pressed to fashion a competitive response that was still fair to other taxpayers in this state.
The property tax ballot question was settled to Minnesota's liking. But my guess is that keeping up with North Dakota will be a recurring challenge for this state's policymakers in coming years, as North Dakota's oil- and gas-generated wealth allows it to do things like cut higher education tuition, offer free preschool and improve care for the elderly -- without raising taxes.
My advice to Minnesota politicians who want "no new taxes" to work that well here? Find oil.