The Lesson In Crystal's Tax Appeal
August 18, 2004
Grand Forks Herald Editorial

OUR VIEW: Government shouldn't rely so heavily on a single taxpayer to pay for essential services.

There's new evidence that property taxes are a poor way to pay for government - if any new evidence were needed.

American Crystal Sugar Co. has asked for cuts in its property tax assessments in four counties in the Red River Valley. Crystal makes a good case, but we'll put the legal arguments aside in this editorial.

The real issue here is one of policy. Both Minnesota and North Dakota have chosen to rely heavily on property taxes to fund local governments, including schools. This is wrong, for reasons that have been discussed here frequently in the past. The Crystal case presents another compelling reason.

It is this: Reliance on the property tax makes governments vulnerable to sudden changes in tax collections, such as might occur if Crystal wins its case. Too many government entities simply are too dependent on Crystal's taxes.

Take the Drayton (N.D.) School District, for example. One out of every $8 the district spends comes from the tax on Crystal's plant there. At Hillsboro, it's $1 in every 12. The impact is less on the Minnesota side of the river, where property taxes are distributed somewhat differently. At the same time, Crystal's Minnesota plants are in larger communities - East Grand Forks, Crookston and Moorhead - so the impact of a single taxpayer is less.

It is dramatic, nevertheless. Valleywide, local governments stand to loose about $1 million in revenue. Much of that goes to schools.

American Crystal is right to appeal its property tax bill. No property owner should pay more than its share of taxes, whether the property is a city lot or a giant factory. In Crystal's case, its contribution is far greater than its property taxes. Somewhere around 30,000 jobs depend on Crystal, and those workers pay property, sales and income taxes of their own.

However the case turns out, state legislators ought to take heed of this important lesson. Depending on property taxes is a bad way to fund government, especially education, and depending on a single taxpayer is even worse.

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