“Bringing Taxes Down Still Doesn’t Quite Compete With Not Having A Tax”

ND Reatail Marketers open

The North Dakota Chamber of Commerce is continuing their pesky billboard campaign in Minnesota, advertising

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North Dakota’s friendlier tax environment relative to the eastern state (to the chagrin of political leaders there). And North Dakota should stick it to Minnesota. As we can see from CNBC’s map of the most business-friendly states, both North Dakota and South Dakota have a big advantage over high-tax, high-spending Minnesota.

But that’s not to say that North Dakota doesn’t have work to do.

Yesterday I pointed out that North Dakota’s energy-driven economy couldn’t top South Dakota in CNBC’s ranking thanks to higher taxes and bigger government.

Many in the state don’t want to hear it, but North Dakota’s leaders are, on the whole, spendthrifts who are hostile to meaningful tax relief. And even some politicos in the state are admitting (grudgingly, it seems) that North Dakota could be doing more on that front:

South Dakota ranked number one in the national study, [Bismarck-Mandan Chamber of Commerce’s Kelvin] Hullet says that could be because South Dakota doesn’t have a state income tax.

“And so that greatly enhances their competitive environment, we’ve lowered taxes dramatically in North Dakota, this last session we saw taxes go down by more than a billion dollars, but bringing taxes down still doesn’t quite compete with not having a tax,” Kelvin Hullet said.

That’s an ironic admission coming from someone who represents an organization that lead the charge in opposing a ballot measure to eliminate the property tax last year.

But setting aside what specific tax reform is right for North Dakota, the simple truth is that the state’s leaders simply aren’t doing enough on that front.

As I noted yesterday, the legislature killed a proposal to put a moratorium on the state income tax for the next two years. While the state House did pass an income tax cut package worth $500 million, the Senate used Governor Jack Dalrymple’s recommendation for only $125 million in cuts to batter the House down to half that amount.

The $250 million in income tax cuts that did pass (I’m not counting the “property tax relief” because I don’t think increased state spending is tax relief) look paltry in light of the project surplus of $1.6 billion announced after the legislative session ended.

The hostility many North Dakota leaders feel toward leaving money in the pockets of North Dakotans will hurt the state in the long run if something doesn’t change.

North Dakota has a strong economy because of an oil boom, and high crop prices (driven high by an ethanol bubble, more on that here). South Dakota has a strong economy because they’ve limited government and kept taxes low. There’s a lesson in that for North Dakota.

The oil boom, and the crop prices, won’t last forever.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • WOOF

    South Dakota has the worst schools in the nation.
    “South Dakota has a strong economy because
    they’ve limited government and kept taxes low.”
    http://www.edweek.org/ew/qc/2013/state_report_cards.html

    • http://sayanythingblog.com Rob

      Well, yeah, but Education Week isn’t hitting South Dakota for academic outcomes. They’re hitting the state for teacher pay:

      South Dakota

      South Dakota is the state with the worst-run school system, according to Education Week. The policies in place in South Dakota would make it very difficult to recruit top teachers. Among other weaknesses, South Dakota doesn’t have pension portability across state lines, doesn’t have a plan to formally differentiate roles among teachers and doesn’t pay teachers to earn national board certification. The state’s governor in 2012 proposed plans to eliminate tenure and pay $15 million annually in bonuses to both high-performing and hard-to-find teachers, although residents voted against the idea in November. South Dakota also scored third from the bottom in transitions and alignments.

      Sorry, but that’s not really the important metric.

      • JoeMN

        Also, teacher pay in this national context fails to take cost of living into consideration.

      • John_Wayne_American

        I have heard from SD hunters that their state Gov. is very understaffed and very slow. They say if you don’t expect much from them, (SD State gov.) you wont be disappointed.

        But look, they only have a few colleges and state run Universities compared to ND 11. they have great income from tourism, and like mentioned record crop prices, they should be doing OK.

    • Jonesy

      The average ACT score in South Dakota in 2012 was over a point higher than ND’s so I don’t think we want to point too many fingers at how terrible their schools are.
      http://www.act.org/newsroom/data/2012/states.html

      • http://sayanythingblog.com Rob

        By that measure, SD is about in the middle of the pack. Good, but not great.

        ND is at the bottom of the middle of the pack. Ironic, given that we pay teachers a lot here (relative to private sector pay in the state).

        • Tim Hines

          Just one small clarification? (And I realize I’m probably not your favorite patron these days, so no worries if you choose not to respond) Your comparison of what we pay teachers relative to private sector pay…. Is that a straight up comparison of levels of education within the private sector, or simply a comparison to the median ND salary?

          • http://sayanythingblog.com Rob

            Median ND salary.

          • Tim Hines

            Thanks!

        • Tim Hines

          And…. I’d better throw this out…. I’m not looking for a fight and/or debate…. I honestly don’t know the answer to this….

      • JoeMN

        Although SD has only 3 percent participation in the SAT, they are ranked fifth overall

        http://www.commonwealthfoundation.org/policyblog/detail/sat-scores-by-state-2012

        • WOOF

          So hardly anybody takes the SAT exam ?
          Don’t most colleges want applicants to take the test ?

          • Jonesy

            Midwest colleges/universities primarily require the ACT. Schools in the New England area and California are more likely to require the SAT.

      • Waski_the_Squirrel

        It’s worth noting that EVERY student in North Dakota takes the ACT. This is not the case in South Dakota. This will bring North Dakota’s average ACT score down.

        • Jonesy

          Yeah that 100% number actually made me question the validity of the data a bit. Does ND require all students to take the ACT during/after their junior year now? I always thought it was just those who planned on post-secondary education….

          • Waski_the_Squirrel

            It really is every student. There are a few states that do this. The idea behind it was that it might make kids consider college. The kids take the ACT as juniors, usually during April.

          • Jonesy

            Thanks. I guess the point still remains that SD obviously doesn’t have “the worst schools in the nation” though based on ACT data which places them above many other states which have similar percentages of students taking the ACT.

          • Waski_the_Squirrel

            Absolutely true. The trouble with the rankings is that they include too many things and the weighting can change where a state is placed. I saw one study this spring that put Georgia at the top.

            The only rankings that can be taken seriously (and even then very carefully) are those which rank one thing. Beyond that, and the biases of those doing the ranking become too much of a factor.

            The truth is that South Dakota and North Dakota both have pretty good school systems, at least relative to the rest of the country (in academic outcomes). The problem is that neither state is working very hard to improve.

          • Jonesy

            I’d agree with that. I don’t consider simply throwing more money at the schools (as ND is doing) to be working to improve the schools. Much of that money is being squandered and is doing little to actually improve student education. The state continues to throw money at problems without setting up useful standards/goals with which they can effectively measure outcomes of increased spending. Paying a bad teacher more doesn’t turn that individual into a good teacher.

  • mikemc1970

    They’ve been trying to get rid of the corporate tax here in OK too. Some politicians just don’t get it. They keep asking “how do we fund our programs?” Umm, the same way Texas does. Then turn around and ask “Why can’t we bring more jobs and businesses into our state?” It’s like trying to herd a bunch of cats. Number 25, that’s just pathetic.

  • http://Sayanythingblog.com The Whistler

    I think that what we got was $125 million in income tax relief after the house passed $500 million and the Senate passed $250 million. By the time they came to reconcile that the wastrels had spent all the money.

    • http://sayanythingblog.com Rob

      No, it was $250 million. $200 million in individual, $50 million in corporate.

      Senate Bill 2156 overwhelmingly passed both the House and the Senate providing $200 million in personal income tax relief and $50 million in corporate tax relief. This represents a 20 percent and 12 percent tax cut, respectively. Combined, these reductions in income tax send unprecedented relief directly back to taxpayers.

      http://governor.nd.gov/media-center/news/dalrymple-signs-250-million-income-tax-relief

  • LibertyFargo

    “Many in the state don’t want to hear it, but North Dakota’s leaders are, on the whole, spendthrifts who are hostile to meaningful tax relief.”

    +1

  • John_Wayne_American

    remember the argument, MN had over the winter, when they wanted to put sales tax on certain items of clothes.. the biz community said any tax, would cause them to loose their “No Tax on Clothes” sales pitch.

    I say cut the sales tax in half and split it with the locals, the more the county sells, the more it collects to off set the personal Property tax.

    Leave the income tax alone, unless you get rid of it completely, it will be like the clothing tax mentioned above, still there.

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