North Dakota Rates Poorly On Tax Policy

The Tax Foundation has released its annual ranking of tax policies in the various states, and North Dakota didn’t do so well. Our state leaders are quick to pat themselves on the back for a “business friendly” environment in the state that is responsible for the nation’s strongest economy (and lowest-in-the-nation unemployment rates), but in reality the state’s tax code isn’t all that business friendly at all.

North Dakota ranked 29th, nationally, out of 50 states in terms of tax climate. That’s an improvement over last year, when the state ranked 33rd, and that improvement had to do with the state’s cuts to corporate and personal income taxes.

Ironically enough, despite a measure being on the statewide ballot for June to abolish property taxes, North Dakota actually ranks as one of the best in the nation (4th) on property taxes. It’s corporate income taxes, personal income taxes and unemployment insurance taxes where the state ranks low.

I’ve said for some time now that North Dakota’s oil boom, along with other strong industries like coal and agriculture, have obscured a lot of bad policies in the state. Despite a not-so-friendly tax environment, despite a state budget that has grown in size faster over the last decade than the federal budget (quite an accomplishment), North Dakota has a strong economy and low unemployment rates because we have an oil boom.

If you subtract the impact of energy from the equation, the state with the best economy in the nation would either be South Dakota (#2 in the Tax Foundation’s rankings) or Wyoming (ranked #1).

South Dakota, in particular, is interesting. As I’ve pointed out before, South Dakota has had a level of economic success in recent years that isn’t all that far behind North Dakota’s, but they’ve done it without an oil boom.

How? Fiscal restraint, low taxes and limited government, that’s how.