Measure 2's Measure of Common Sense

Column by George F. Smith.

Exclusive to STR

Measure 2 is a proposal to amend the North Dakota constitution to eliminate property taxes.  According to polls, most people oppose Measure 2 because it would require legislators to replace lost revenues from other sources.  K-12 school funding would be heavily impacted.  A vote on June 12, 2012 will decide its fate.

Measure 2 opponents correctly believe if the state collects less tax revenue, there’s less money for the state to hand out.  And that means various state-funded programs, particularly K-12, would lose revenue, which would produce hardships all around.

No argument there.  But what about the state’s property owners who have to pay the tax?  They, too, will have less to spend.  Various businesses who would otherwise benefit from doing business with them will suffer losses.  When businesses lose, their employees lose as well.  There would be hardships all around.

So who’s right?

Let’s ask who owns the money the state currently taxes away.  Obviously, the property owners who pay the tax own the money.  If the state already owned it, no vote would be necessary.  

Our society is still based on the freedom of the individual, and the essential characteristic of a free society is the recognition of property rights.  The money the state expropriates in taxes is the property of its rightful owners, the taxpayers.  It should be left to them, and only them, to decide how to dispose of their money.

Unlike a private business, the state does not acquire revenue through voluntary exchange with others.  It acquires it through force - taxes and fees.  A theory of government says that certain services cannot be provided by people trading with one another - i.e., the free market -- that they must be provided through the state’s mechanism of expropriation by majority vote. Formal education is cited as one such service, since without government control some kids might fall through the cracks and get "left behind."  But as economist Murray Rothbard points out

What would we think of a proposal for the government, Federal or State, to use the taxpayers’ money to set up a nationwide chain of public newspapers, and compel all people, or all children, to read them? What would we think furthermore of the government’s outlawing all other newspapers, or indeed outlawing all newspapers that do not come up to the “standards” of what a government commission thinks children ought to read? Such a proposal would be generally regarded with horror in America, and yet this is exactly the sort of regime that the government has established in the sphere of scholastic instruction.

It is sometimes argued that public schooling benefits the whole community, and therefore the whole community should be forced to pay for it.  It could be argued that my purchase of a new suit would benefit the whole community because better-dressed people tend to attract more business than people whose appearance is slovenly.  Yet, no politician has been elected on a platform of funding my need for new clothes.  What gives?  Is clothing not as essential as education?

When studies show American students declining in academic skills, the call goes out for more money to fix the problem.  Charging more for subpar performance is usually not an option for schools that depend on customer choice, which is why they tend to outperform public schools.

If people had greater disposable incomes, which Measure 2 would provide, more people could participate in private education, homeschooling included.  With increased demand for private schooling, there would be more suppliers, each competing with the rest.  Competition would drive down costs.  We would also see low-cost innovations in delivering education - see, for example, the Khan Academy.  A good education would be available to anyone who wanted one.   

If this trend sounds like a pipe-dream, consider that it’s the way free markets have always worked.  A decade ago a smartphone was a pipe-dream.  Today, they’re commonplace, not because of government mandates and taxes, but because competition and customer demand have lowered costs of production to make them affordable for almost everyone.  They get cheaper and better each year.  That’s the free market way.  If education were freed from government’s grip, it would get cheaper and better.

Imagine what people could do for their children’s education if they could keep the money they’re now forced to pay for property taxes.  As private schools proliferated, competition for good teachers would reward the better ones according to their merit, and parents would be free to seek out the best instructors.  People without children or whose children are grown would have more money to invest in the local economy.  How is this not a win-win all around?

We used to trust housing to the market.  Then the government decided everyone should own their own home - much like its belief that everyone should get a “free” education.  So it dove head-first into the housing market.  The result was the monumental market collapse we’re still experiencing.  It’s time we returned education to the market, as well.

North Dakota is already the envy of the rest of the country because of its relatively low debt and high prosperity.  Per capita income in North Dakota between 2001 and 2011 was about double the national average.  

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George F. Smith's picture
Columns on STR: 71

George F. Smith is the author of The Flight of The Barbarous Relic, a novel about a renegade Fed chairman.  Visit his website.    



KenK's picture

The Free State Project be damned! If ND passes this and it survives the Wisconsin-style machinations of the tax feeder class I am definitely moving there. Seriously.