The Case For Eliminating North Dakota's Income Tax

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?