The Case For Eliminating North Dakota’s Income Tax

income-tax-tom

In an article about push by Republican governors and legislators around the nation to reduce, and even eliminate, income taxes the Wall Street Journal cites a remarkable statistic:

A new analysis by economist Art Laffer for the American Legislative Exchange Council finds that, from 2002 to 2012, 62% of the three million net new jobs in America were created in the nine states without an income tax, though these states account for only about 20% of the national population. The no-income tax states have had more stable revenue growth, while states like New York, New Jersey and California that depend on the top 1% of earners for nearly half of their income-tax revenue suffer wide and destabilizing swings in their tax collections.

You readers may be wondering, why should North Dakota be worried about job growth? That’s a fair question, especially given that there are times when the number of job openings in the state has been larger than the number of unemployed people, and by no small margin either. But leveraging the state’s current windfall for substantial tax relief isn’t about job creation now, it’s about making sure North Dakota doesn’t have all its eggs in one basket.

For decades now the state’s leaders have talked about diversifying North Dakota’s economy. We’ve spent a lot of money to that end on various education and economic development schemes, but right now North Dakota’s eggs really are in one basket. Governor Jack Dalrymple warned about it in his State of the State address earlier this year. “There are higher risks associated with any economy that is heavily dependent on the value of raw commodities,”
Dalyrmple said, “and those risks must be carefully considered.”

Indeed. And why we’re considering them, let’s also consider the fact that the states which have seen the most investment and the stablest base of tax revenues are states that have gotten rid of the income tax.

North Dakota should be looking at ways to move beyond being just an energy state or just an agriculture state. Eliminating personal income taxes would be a big step in the right direction. Eliminating corporate income taxes, too, would be an even larger stride.

We have bills before the legislature to do this. Rep. Scott Louser has introduced HB1182 which would suspend the personal income tax for two years with an eye toward eliminating it permanently after that. Short of that, Rep. Craig Headland has a bill, HB1250, to dramatically lower both the corporate and personal income taxes.

Will North Dakota’s leaders follow the example of Republicans in other states in making bold moves toward lowering income tax burdens? Or will they continue to be needlessly reticent about tax relief, erring on the side of keeping far more money in government than necessary?

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.

Related posts

  • ec99

    Will never happen. Elected officials at all levels have come to believe government owns the assets of its citizens. The question is simply how much we are allowed to keep. This seen in such areas as property taxes, where local government decides both the levy and the value of the house, to the feds, who can change the rules of the game year to year. Those who buy a house believeing they’ll always get a mortgage deduction, better think again.

    • NDConservative2011

      Your right. Tax Commish Fong ran around the state railing against Measure #2 to eliminate property tax explaining that property tax was one of the three legs in the tax “stool”, and if it elimated, the stool could not be supported. The other two legs according to Fong were income tax and sales tax.
      I wonder what his take is on elimination of income tax.
      The citizens of North Dakota were sold down the river on Measure #2 as the state is awash with revenue and could easily eliminate property tax. It takes courage to change, and courage is hard to find in Bismarck.

      • ec99

        I understand one of the qualifications for membership in the ND legislature is a trip to an orthopedic surgeon to make sure the candidate doesn’t possess a spine.

      • http://sayanythingblog.com Rob

        Any time a politician starts talking about the three legged stool they should have chairs thrown at them. That is a rhetorical gimmick used to argue against all tax relief.

        It is triangulation, and quite effective, but utter nonsense.

        • jimmypop

          no, its actually quite logical. spread the pain out as equally as possible so all pay ‘their fair share’ without one leg holding all the cards…..for should that leg leave or get broken….

          however, the problem is that the legs become too big and too long…… and nobody wants to make them all skinny and short ever again.

          • http://sayanythingblog.com Rob

            We can’t ever cut taxes because fools like you fall for the stool thing. You can argue against any tax cut by saying it’ll make the other “legs” longer.

          • jimmypop

            uh, no….. if our stool had one leg, youd encounter the same issues.

            there is never a political will to cut taxes because someone WILL have to raise them again one day. and anti-government fools like you will cry FAR LOUDER then than now. so, theyd rather let you cry quietly and maintain a level than hear your cries when its time to raise taxes again.

          • http://sayanythingblog.com Rob

            uh, no….. if our stool had one leg, youd encounter the same issues.

            That doesn’t even make sense.

            They use the triangulation argument all the time. Remember when we were trying to cut income taxes in 2008 through a measure? Governor Hoeven argued that if we did sales taxes would go up (even though the state had a surplus).

            And when we tried to eliminate property taxes? Oh, we can’t do that, income taxes and sales taxes will go up!

            They argue against every tax cut, because every tax cut would make one of the “legs” on the stool longer.

            It’s a stupid analogy, but useful for those who don’t actually want to cut taxes. Especially because people like you fall for it.

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

        All you have to do is look at the cost to taxpayers for the total compensation that flows into the Fong household. It is eye popping!

        • jimmypop

          highly paid people are not evil.

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

            If they merit the compensation, it’s not. In this case, it’s nepotism and political patronage.

    • DelawareBeachHouse

      But as the WSJ editorial points out, it IS happening. In states with governors — or perhaps an electorate — who are not so risk-averase.

  • borborygmi

    THey missed the best Reason, Kevin Flaanagan will then be able to get on with his life.

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

      But you have an irrational fear that your government benefits wouldn’t grow as fast, if they did eliminate the state income tax.

      • borborygmi

        You probably fear the elimination of the state income tax your raison d’etre would be gone. Poor Kevin

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

          Until all the knuckle heads are expunged from public payrolls, my work will never be done.

          • borborygmi

            What knuckle heads would you like to eliminate, FIremen, Policemen, teachers, sanitation workers, public work laborers. Which knuckle heads?

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

            I would ax the lazy and incompetent ones.

  • jimmypop

    we can aways bring it back when we need the money.

    why is this so hard for so many to grasp… when we need the money, take it and use it. when we dont need it…leave it in the hands of those that earned it. is it that tough?

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

      What are you going to do with the bureaucracy; put them on paid furlough?

      • http://sayanythingblog.com Rob

        The Tax Department has already testified that they can be assigned to other areas during the suspension.

  • reggy

    I’d rather see them reduce the sales tax.

    • http://sayanythingblog.com Rob

      There’s that three legged stool thing again.

      We can’t ever cut “x” because some group of people would rather cut “y.”

      The end result? We don’t really cut anything.

      Sigh.

  • $8194357

    Triangulation from federal central planning….
    Ponzi shaped huh….
    Bankers, lawyers, and politicians…
    What an ‘un-holy trinity’………….

    Follow the “global” money trail to:

    global hedgefunds
    the politicians from the UN
    and the international rule of law…

    Kinda the same redistributive debt ponzi
    set up in America in 1913 going global in 1948, huh…
    One world new world order is all a twitter with its success..

    An oldie but a goodie……
    From simple structures complex ideologies grow….

  • Lynn Bergman

    Eliminating the personal AND corporate income taxes would not be as bold a move as one might think. The economic activity that resulted from leaving the money in the pockets of those who EARNED IT would likely compensate for the lost revenue in the long run. But then, with so many special interests standing in line to raid the legacy fund in 2017, I don’t have much hope for a visionary legislative session that would be willing to insure prosperity forever. What issue would they run on in the next cycle?

Top