North Dakota officials propose flat tax rate, eliminating personal income tax for most taxpayers – InForum
BISMARCK, ND — Governor Doug Burgum and other officials announced a plan to save North Dakota taxpayers about $250 million a year by moving to a single flat rate that would eliminate income tax on individuals for nearly 60% of taxpayers.
The plan, introduced Tuesday, Aug. 24, would effectively eliminate state personal income tax for more than 388,000 North Dakota taxpayers with adjusted gross income of $54,725 or less for single filers or $95,000 or less for married couples filing jointly.
If approved by the North Dakota Legislature, which meets in January, the tax relief plan would take effect for the 2023 tax year and group North Dakota among 10 states with a rate fixed income tax.
Burgum touted the proposed 1.5% flat tax rate, which he called “permanent and significant relief,” as the lowest in the nation that would improve the competitiveness of state businesses and attract workers. .
The proposal calls for eliminating the state’s lowest tax bracket for individuals, which officials say would help working-class taxpayers. Those who continue to pay state income tax would see reductions ranging from 26% to 48%.
“All taxpayers in North Dakota will benefit,” Burgum said.
State budget coffers are overflowing at record levels, including a Fiscal Stabilization Fund which had a balance of $724.1 million, the Strategic Investment and Improvement Fund which had a balance of $689 million dollars and the Legacy Fund which had a balance of $8.2 billion, all as of May 31.
Income to date for the biennium is 20.5% higher than forecast.
“At the end of the day, the state is doing extremely well,” Burgum said. “Now is the time for meaningful and permanent tax relief.”
Passing the income tax relief program would mean that the state could not accumulate as much money and would place future constraints on the growth of state government, he said.
“It doesn’t make sense for the state to keep hoarding more cash,” the governor said. “We have to put it back in the hands of the citizens.”
The proposed flat tax is the culmination of years of tax relief work, according to Lieutenant Governor Brent Sanford. “It took a long time to get here,” he said.
“We’re at the point where we can afford to do that,” he said, adding that officials will one day strive to eliminate personal income tax. Last year, lawmakers passed a $211 million tax relief package for about 500,000 North Dakota taxpayers in 2021 and 2022 by providing an income tax credit of up to $350 a year. for single-income taxpayers, or up to $700 per year for married couples.
Over the years, state officials have provided more than $7 billion in property tax relief, some permanent, Burgum said, noting that property taxes are collected by local governments, not by the state.
Brian Kroshus, state tax commissioner, said that under current rates, 16.1% of North Dakota taxpayers pay no personal income tax. According to the proposal, this would increase to 57%.
“Nobody backs down,” Kroshus said. “Everyone benefits.”
Rep. Craig Headland, R-Montpelier, chairman of the House Tax Committee, noted that more states have moved to a flat tax, but said North Dakota will stand out for having the lowest rate.
“With this bill, we will have the lowest flat tax in the country,” he said, adding that his goal was to bring the rate down to zero.
Legislative leaders and other members of the House and Senate tax committees attended the announcement, apparently reflecting broad support for the flat tax proposal. Republicans have qualified majorities in both legislative chambers.