If there are two to priorities for the legislature, in the eyes of the general public, it is addressing needs created by the state’s fast-growing economy and population and using some of the state’s revenue windfall for tax relief.
To that latter point, there are a number of proposals on the table for tax relief. Most, including Governor Dalrymple’s high-profile proposal for a state take over of most local school funding, target property taxes, but Minot Rep. Scott Louser wants to address income taxes.
Louser told me in an interview that he’d like to suspend collection of personal income taxes for two years – the 2014 to 2015 biennium – as a sort of “toe in the water” for an eventual elimination of the tax.
This would not apply to the corporate income tax.[youtube http://www.youtube.com/watch?v=NJisG81nn30&w=560&h=315]
It’s worth noting that other states, not enjoying anything near North Dakota’s tax revenue windfall, are looking at eliminating income taxes.
Determining what this might cost in revenues isn’t easy. It’s a bit like a game of pin the tail on the donkey. According to the most recent numbers from the state’s Office of Management and Budget, from the beginning of the biennium through November of 2012 the state had collected $592,345,912 in personal income tax revenues, which exceeded projections by a whopping 61%. Based on that number, personal income tax revenues will almost certainly meet or exceed $1 billion by the time the biennium ends in June of this year.
As of July of 2011 the OMB was projecting that income taxes would make up 15.8% of general fund revenues, though again that’s based on projections that have far understated revenues, though it should be noted that other tax revenue streams have far exceeded revenues as well, so that percentage may stay about the same.
Put simply, this would be a very big tax cut, which may actually work against it. Our legislature, on the whole, has proven reticent to embrace ideas that give back large chunks of tax revenues to the taxpayers, preferring instead the sort of “property tax relief” they’ve put in place in the past which consists of the state transferring large chunks of revenues to other levels of government.
Which, of course, isn’t really tax relief at all.