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.