Elected officials that repeatedly support and vote for tax incentive giveaways in the name of "economic development" have no leg to stand on to criticize businesses that take advantage of their programs. Crony capitalism is not capitalism, it's a form of socialism promoted by both Republicans and Democrats to pick winners and losers.

April 28th, 2016

The Interim Political Subdivision Taxation Committee has been doing some good work. Created by Senate Bill 2057, this committee was supported by the Watchdog Network during the session as a means to final start the process of determining the value of all the tax incentives and giveaways the state has created for itself and for local government.

Until recently, this committee has quietly done its work.

The blaring headline on Tuesday was with regard to one specific program the state offers called The Angel Fund Tax Credit.

The interim tax committee has discovered that this program has a very serious problem - there's no way to track whether it is doing the state of North Dakota any good! (Hint: all tax incentive programs have this problem, that is why we always support Tax Rate Reductions for everybody rather than special deals for a select few.)

From the Bismarck Tribune:

Lawmakers became increasingly flummoxed Tuesday when officials outlined a stark contrast Tuesday between reporting requirements and standards in North Dakota and Minnesota for granting and tracking angel fund tax credits.

Members of the interim Political Subdivisions Taxation Committee said a comparative lack of transparency in where angel fund tax credits are being invested as well as the identities of investors was troubling.

“This raises a ton of red flags for me. It does not smell right,” Rep. Mike Nathe, R-Bismarck, said. “This is being done on the backs of North Dakota taxpayers.”

House Majority Leader Al Carlson, R-Fargo, while not a member of the committee, attended the meeting and agreed with Nathe.

“Shame on us,” Carlson said of the lax degree of transparency.

Shame on us is right. This and all the other selective tax incentives created to benefit certain taxpayers for doing certain things that some politicians would like to see happen is something to be ashamed of for sure.

None of this information is really new.

A brief look at the legislative history file of House Bill 1057 in the 2011 Session shows that almost everything being discussed now was known and understood in 2011.

Questions about the effectiveness and usefulness of the program, beyond a tax haven for certain investors were raised, but the program was continued with some changes to the law.

As was relayed yesterday in the spotlighting of Tony Gerhig's work in Fargo, it takes real leadership to stand-up to these sorts of policies that favor some taxpayers over others.

Going further back to 2007 when the Angel Fund Tax Credit program was created with Senate Bill 2224 we only need to look at the roll call of the votes in favor of the program to see whose idea it was to create a program with no measure of effectiveness or Return on Investment:

When the 2009 session came along, and legislators had their first chance to tweek the program with Senate Bill 2269 both chambers voted unanimously for the changes.

In 2011, as stated above, this program was discussed and reviewed extensively. The ins and outs of the programs were well documented in the bill history.

In 2013, Senate Bill 2237 was sponsored and introduced by State Senator Joe Miller (by himself with no co-sponsors). SB 2237 included several reforms, including a specif ban on using Angel Funds Tax Credits on anything related to real-estate development.

This bill got two votes on the Senate floor - Senator Miller himself, and Senator Marcellais (a Democrat). (Important to note that Senator Miller was not in the Senate during the 2007 session, and as such did not vote for the program in the first place. He is also not running for re-election, so North Dakota taxpayers are losing a strong ally in the Senate.)

So when you see headlines like that in the Fargo Forum today which attack people from using the programs that legislators created and supported read it with a grain of salt.

The only voices on this issue that can with a clear conscience issue an opinion are those who voted against the program in the first place, those who raised serious concerns over the years, and those who were willing to take pro-active action to protect the taxpayers.

It's a very small list. And the Fargo Forum itself is not on that list, as it has always supported these programs as well as the businesses and investors that have used them.

All government economic development programs and incentives represent a Moral Hazard.

Politicians who vote to create candy for special businesses and investors have no grounds to complain or criticize those investors or businesses when they take the candy. If the lobbyists talk the politicians into these unwise programs, it is still the politicians making the decisions. They cannot pass the buck.

Likewise, if businesses and investors do not want to be labeled as corporate welfare cases, they should change their ways and promote a level playing field for all. Lower rates and consistent rules for everybody.

It's time to hit the RESET button on all Economic Development programs in the State of North Dakota.

Anyone who carries that message and works to put it into action can make up for their previous business decisions, if they are willing to learn their lesson.

Hopefully our elected officials at the state and local level of learning their lesson with all this. The taxpayers deserve better.

-Dustin Gawrylow, Managing Director

North Dakota Watchdog Network