So Much For Being Business Friendly: North Dakota Tax Environment Gets Low Rating

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As North Dakota prospers, the political leadership here is quick to give themselves a mighty pat on the back for a job well done. They’d have us believe that it is policies they’ve put in place that has allowed North Dakota to skip the national recession and consistently post some of the nation’s highest income growth rates and lowest unemployment rates.

There’s a lot of talk about the “North Dakota way” and the “North Dakota model.” But what do those terms mean, really? What is it, in terms of policy, that makes North Dakota so special?

It’s not the tax code, that’s for sure. According to the Tax Foundation, North Dakota ranks in the bottom half nationally in terms of a business-friendly tax environment:

North Dakota ranks 29th in the Tax Foundation’s State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states rank as follows: Montana (8th), South Dakota (2nd) and Minnesota (45th).

That’s certainly a departure from what we usually hear from the media, which is that North Dakota has a “business friendly environment.” But that has more to do with the special economic development deals certainly businesses get, not the overall tax environment.

It’s not a friendly tax environment that has made North Dakota prosper. It’s not the ridiculous amounts of tax dollars poured into our subpar higher education system, or the myriad of local and statewide economic development schemes (all states do that). It’s the fact that we have an oil boom coupled with strong coal and agriculture production, and our leaders are at least smart enough to mostly stay out of the way of those industries.

In other words, North Dakota has prospered despite our political leadership, not because of them.

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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  • Dakotacyr

    Or right in the middle when you consider Eakin and other conservatives are on the board of the “nonpartisan” Tax Foundation.

    Depends on what you are trying to advocate for which in your case is to prove how bad tax policy is in ND. But In reality we are about right.

  • Dakotacyr

    And I suppose you missed the article on the front page of the TF ND pages that ND is a state with one the lowest levels of state and local taxation burdens. Oops!

    • http://sayanythingblog.com Rob

      Oh my gosh I’m a laughing at you.  First you try to dismiss the Tax Foundation, then you find some bit of data to cherry-pick to muddy the waters.

      Which is it?  You can’t have it both ways.

      And tax burdens need to be put into the context of our economy, which generally has lower levels of income.  The Tax Foundation does it per capita, they really should do it as a percentage of income.

      And, of course ,their analysis of the business tax climate ( which was the point of this post) remains as is despite your obfuscation.

      • Dakotacyr

        Wow, you cite a study by the tax foundation then don’t like the way the tax foundation does its studies. Talk about cherry picking!

        • robert108

          Doesn’t that depend upon the truth of the matter?  It’s not “cherry-picking” to identify the good information and the bad information.  Do you claim that the tax foundation is perfect?

  • borborygmi

    obviously it has destroyed the energy sector also. 

    • robert108

      Not that they haven’t tried to destroy domestic energy, but American ingenuity wins every time.

    • http://sayanythingblog.com Rob

      The energy sector has survived because of market conditions.  Meaning despite our ridiculous extraction tax (as one example).

      The oil boom is covering up a lot of bad policy.

  • WOOF

    The Tax Foundation is a Koch/ALEC corporate front group.

    • http://sayanythingblog.com Rob

      You libs try to attack the Koch brothers to everything.  The Tax Foundation, as an organization, has been around longer than the Kochs have been alive, so they’re hardly a “front group.”

      But whatever lets you ratlonlize closing your mind to the arguments, I guess.

  • TexasJew

    North Dakota is simply benefitting from the entrepreneurial spirit of out of state petroleum professionals

  • http://nofreelunch.areavoices.com/ Kevin Flanagan

    The state’s tax policy is to extract as many assets and as much income from the private sector as possible then funnel it to all the slackers on the state payroll.

    • Reggy

      Have you ever supported your inane banter with any actual evidence or facts?  You might want to consider it.

      • http://nofreelunch.areavoices.com/ Kevin Flanagan

        My tax bills are evidence enough. Numbers don’t lie, though state bureaucrats wish they would.

  • Ndexault

    This should have come out before June 12th when measure 2 was being voted on.

    • Dustin Gawrylow

      These reports come out every year, we’ve made up ground, but not enough.

  • Paul Overby

    Wyoming and SD must get their money from someplace else than these four taxes. Looking at only these four categories to rank “business friendly” environment is stupid.  Otherwise Wyoming would be the Cayman Islands of the US.

    • Jimmypop

      BINGO. these tidbit reports are too silly to even care about. all you need to do is what you and the rest of us did…. say gosh i swear SD has a government. as do their cities. how do the pay for it if its’ not in these couple items?’

      granted, we could and SHOULD have ZERO personal income tax. further, our sales tax needs to be reduced as well (maybe to zero on clothes). but to say ND is too burdensome is craziness.

      • Gern Blanston

        O.K. – so where IS SD and MT getting their money if it isn’t in these categories? Just becasue they have lower tax rates doesn’t mean they have no income from taxation. Maybe it just that they are able to get sufficient funding from these sources. Maybe they do a better job managing their finances.

        The real question is: How can such a presumably ‘red’ state like ND be in the middle of the pack in tax environment? ESPECIALLY with the new-found revenues coming from oil? Everyone want to cite our fear of an oil bust as a reason to NOT lower taxes – yet we have a rainy-day fund in place – I thought THAT was to protect against a bust?

        INCREASED state spending should be delegated to western ND infrastructure and a small amout to account for relative growth of the population. Nothing else.

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