The Cass County Commission (Cass County encompasses the city of Fargo, ND) is talking about raising the sales tax there by a half a percent in order to fund economic development initiatives.

Let me say that in another way.  The Cass County Commission is going to make it more expensive to buy things in their county in order to attract more businesses and shoppers.

Doesn’t make much sense does it?  Of course not.  You don’t spur economic growth by raising taxes and then giving the revenue to a bunch of politicians to dispense at their whim.  You spur economic growth by getting out of the way of business.

As an example, take the sales tax revenue boom North Dakota saw last summer:

Of the four largest cities, Grand Forks sales grew slowest. Grand Forks taxable sales and purchases were up 0.75 percent in 2005 over 2004, compared with increases in Fargo of 6.3 percent; Minot, 7 percent, and Bismarck, 12.6 percent.

Grand Forks has a 1.75% sales tax.

Fargo has a 1.5% sales tax.

Minot has a 1% sales tax.

Bismarck also has a 1% sales tax.

So, basically, of North Dakota’s four largest cities the two that experienced the slowest economic growth had the highest sales taxes. The two that had the fastest economic growth had lower sales taxes.

There are other factors at play here, of course, but the point is clear: High tax burdens slow economic growth. Lower tax burdens encourage economic growth.

Economic development involves creating business-friendly policies that keep the tax and regulatory burden on businesses and shoppers low.  It doesn’t involve raising tax burdens and then expecting politicians to make the right economic choices for the entire community.  Because usually politicians make choices based on what’s best for them, personally.  Not the entire community.