James Kerian: North Dakota Must Eliminate The Income Tax

Two years ago House Majority Leader Al Carlson announced his support for eliminating North Dakota’s income tax.

It was a good idea then, but it’s absolutely necessary now.

Eliminating the income tax is the surest and fairest way for the state government to give tax relief to the people of North Dakota and it is the only way for the Republican majority to take a meaningful stance for taxpayers that will be noticed and appreciated even by those who do not closely follow state politics.

In previous sessions billions of dollars have been spent on property tax buy downs which were advertised as tax relief for North Dakotans.  Unfortunately in many (perhaps most) districts local governments have raised the mills and absorbed most/all of the buy downs into their own budgets.  What was meant to be relief for the taxpayer then becomes merely a transfer of funds from the state government to local governments.

Each session there is discussion of reducing the state sales tax but since many municipalities have their own local sales tax it is very likely that any reduction in the state sales tax will also be absorbed into the budgets of local governments.  Because there are no local income taxes the elimination of the state income tax is the only way the governor and the legislature can be certain that tax relief will reach North Dakota voters.

Frustrated legislators have pointed out that voters should blame local governments, not the legislature, for the growth in local budgets and the fact that tax relief instituted at the state level is not making it down to voters.  There is certainly something to be said for this claim but wishing for a better informed and more attentive electorate has never changed anything.  The fact is most voters know only that the state is running a surplus and their tax bills are not decreasing.

From a strictly political viewpoint there is a limit to how much patience voters will have for this and they are likely to run out of patience long before they become more attentive to policy details.  The Republican majority in Bismarck needs an accomplishment on real tax relief which will be noticed by every voter, not just those who follow politics.  The only candidate for such an accomplishment is the elimination of North Dakota’s individual income tax.

While it is true that many voters pay very little in state income tax it is a burden they are all aware of.  Nearly every voter is reminded of the state income tax with each pay stub they receive and while they may or may not notice a reduction they will certainly notice if the tax is entirely eliminated.  Each taxpayer either pays an accountant to prepare their state income taxes or works through the forms themselves and the elimination of either obligation would be appreciated by voters at all levels of income or political involvement.

Everyone knows that further tax relief is necessary both as a matter of fairness and as a matter of political necessity.  Even the Democrats are proposing tax breaks but, as you might expect, they have to first divide the electorate into special interest groups so they can bestow tax relief selectively upon whichever group they are targeting in their campaigns.

The decision legislators (meaning Republicans) will have to make next session is where to prioritize tax relief.  Prioritizing the elimination of the state’s individual income tax is fair, effective, financially prudent, politically savvy and overdue.