ND Legislature debates income tax reform; some argue why not property tax?

Published: Jan. 11, 2023 at 6:32 PM CST
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BISMARCK, N.D. (KFYR) - We’ve been talking about it for months: Governor Doug Burgum wants to cut income taxes. And Wednesday, his bill got its first hearing at the State Legislature.

Do you like the idea of tax-free income? Governor Burgum does. And so do a number of powerful lawmakers in the Legislature. But the questions surrounding this bill are: how much would it cost, who would it affect, and why does the governor have his sights set on income tax rather than on property tax?

It’s not often you see the governor at Legislative committee hearings, but income tax reform is at the center of his plan to address the state’s workforce needs.

“This is especially important right now when we’re in deep competition for workers across the nation,” said Governor Burgum.

The bill would impose a flat tax rate of 1.5% for individuals making more than about $45,000 or married filers making more than about $75,000. As for those who make less than $45,000 per year: no state income tax.

“By doing this, three out of five taxpayers in North Dakota will have a zero-tax obligation to the state of North Dakota,” said Representative Craig Headland, R-Montpelier.

But despite support from both tax committee chairmen, the governor, and the tax commissioner, opponents of the bill have raised some concerns about who the bill would benefit.

“60% of tax filers in North Dakota, they get about $220 [per year], divide that out by 26 for people who are getting paychecks every two weeks, it’s just a few dollars extra in the paycheck. It gives $36,000 every year for people making over $490,000,” said Representative Zac Ista, D-Grand Forks.

Democrats aren’t alone in their opposition to the bill. Fellow Republicans are worried this would negatively impact programs that are boosted by tax credits.

“We impact lots of things, I mean, the endowment fund credit. There’s a laundry list of credits the state does, automation credit, the Renaissance Zone credit, a workforce recruitment credit, all of those things become less valuable when we reduce the rates because people just aren’t paying the tax in the first place,” said Rep. SuAnn Olson, R-Baldwin.

Additionally, they believe income tax relief isn’t the primary tax problem for North Dakotans.

“The tax that keeps families up at night right now is the property tax. And yes, that is not a tax that we levy at the state level, but we’re kidding ourselves if we don’t think our state policies impact the amount of property taxes our cities, counties, park districts are levying,” said Rep. Ista.

Still, Governor Burgum says this legislation, rather than property tax reform, is vital to addressing the state’s workforce issues.

“When you’re marketing to get people to move to your state, the message is simple. We have zero personal income tax in our state, open your business here, hire your employees here, versus other states like Minnesota, and keep ‘em here,” said Governor Burgum.

Governor Burgum sees this bill as a first step towards zero income tax for all North Dakotans.

Immediately following this hearing, the committee heard another income tax reform bill. That one would give individuals a tax credit of $750 for individual filers or $1,500 for married filers.