The Consequences of Eliminating Sales Taxes

Tax by definitionThe Tea Party era is waning in most places, but not in North Dakota.  Yesterday, Republican Rep. Scott Louser proposed eliminating state sales taxes for the next two years, calling the plan “big, bold, aggressive but also responsible.”  The measure would apply not only to individuals, but estates and trusts.

When a strongly misguided group unsuccessfully tried to eliminate property taxes last year, I knew this wouldn’t be the last time the extreme right tried to assault the tax code.  This latest challenge came sooner than I expected.

The problem with eliminating sales taxes, even temporarily, begins with the disingenuous nature of the ‘temporary’ label.  Trust me, it will be made permanent at the end of the trial period.  Just like the Bush tax cuts, the expiration of the sales tax cut in North Dakota two years from now would be a club for the Republicans to use on the Democrats.  I can see Representative Louser now — at the podium accusing the Democrats of wanting to raise your taxes for their refusal to vote to make the sales tax cut permanent.

The big problem, however, is the consequence to North Dakotans’ bank accounts.  I can speak from experience because I once lived in a state that banished sales taxes — Texas.

In Texas, you don’t have to pay sales taxes on anything.  But you pay through the nose for everything else.  At the time I lived in Texas, renewing the registration on your vehicle was outlandish.  Vehicle registrations had a floor fee amount, considerably higher than they are in North Dakota, and were graduated based on the value of your vehicle.  My old Chevy cost $120 to renew the registration (this was over a decade ago, when North Dakota’s registrations were about forty bucks) and my co-worker’s brand new Ford pickup was over $500 to register.  Every year.

If it were just a few higher fees here and there, you might argue that it’s a worthy tradeoff.  Unfortunately, there are invented fees to deal with too.  You see, no matter the size of your state, sales tax revenues bring in so much money, even increasing fees on things like motor vehicle registrations can’t make up the difference.  So the next step is to invent things for which the state can charge a “fee” — which is really a tax, let’s just call it what it is.

In Texas, they invented a program called the “Unicard.”  The Unicard is a state-issued card you have to buy before you can drink in the bar.  When you turn twenty one (or when you move to Texas if you’re a new resident) you have to send a photocopy of your drivers license to a state office with a $50 application fee, and in return, they send you a Unicard.  It’s nothing special, and it doesn’t have your picture on it — it’s just a plain paper card with your name and an official-looking state seal on it.  Supposedly, you’re supposed to carry it with you when you’re at the bar, and the servers and bartenders are not supposed to serve you without it.

The truth is, nobody ever asks you to see your Unicard.  They just ask for your drivers license like normal, and your Unicard goes into a junk drawer, never to be seen again.  It’s an invented program designed to make up for the lack of revenue from having no state sales tax.  They replace your eliminated taxes with more taxes.

If Representative Louser wants to be truly forward thinking and reward North Dakota’s citizens for the state’s oil wealth, he should propose the appropriate constitutional amendments to create a North Dakota Legacy Fund Dividend Division, just like Alaska’s Permanent Fund Dividend program, and allow North Dakotans to apply to receive dividend checks from oil revenue each year.  Unfortunately, that kind of benefit is more beneficial to North Dakota’s low and middle income families — families for whom a two thousand dollar benefit check could make a huge difference — than it is for big business and the wealthy.  Clearly, Representative Louser is more interested in kissing up to high dollar donors and achieving political objectives than he is in returning your hard earned money to you.