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Proposed elimination of tax deduction worries ND county association

Tax code books sit on a table as the House Ways and Means Committee begins markup of the GOP tax bill on Nov. 6, 2017. Andrew Harrer / Bloomberg News1 / 2
North Dakota Association of Counties Executive Director Mark Johnson2 / 2

BISMARCK — A group representing North Dakota county governments is urging against cutting a popular tax deduction as congressional lawmakers inch closer to voting on an overhaul of the nation's tax code.

The state and local tax deduction, or SALT, has emerged as a key difference between the Republican House and Senate tax plans. The Senate bill would do away with the deduction, while the House plan would still allow for a property tax deduction of up to $10,000, according to the Washington Post.

In a letter to Sen. John Hoeven, R-N.D., North Dakota Association of Counties Executive Director Mark Johnson said the deduction "guards against the double taxation of households and protects the fiscal integrity of state and local governments."

More than 68,000 North Dakota households claimed the deduction in 2015, according the National Association of Counties, with an average deduction of $6,865. In an interview, Johnson worried that people would have less incentive to buy property without the deduction, reducing the tax base for local governments.

"We're not opposed to what Congress is trying to do ... in terms of trying to provide tax relief to citizens," he said Tuesday, Nov. 14.

In an emailed statement, Hoeven said the Senate plan maintains the property tax deduction for small businesses, farmers and ranchers. He would support keeping the House's $10,000 property tax deduction for homeowners as well.

North Dakota Tax Commissioner Ryan Rauschenberger said most people here claim the standard deduction, which both bills would roughly double.

"We believe there are a lot of people who are even currently taking the state and local deduction who will benefit more from taking the bigger standard deduction," he said.

Rep. Kevin Cramer, R-N.D., said he supports the House proposal as a "perfect middle ground." He said the deduction encourages local and state governments to increase taxes.

Cramer said he expects the House to take up the tax bill Thursday. Republicans controlling both chambers of Congress and the White House are eager for a legislative victory, and President Donald Trump visited North Dakota in September to bolster support for his tax plan.

Another wrinkle was added to the debate Tuesday when Senate Republicans decided to include a repeal of the Affordable Care Act's individual mandate to the tax bill, the Post reported.

Sen. Heidi Heitkamp, D-N.D., said in a statement that it's "very concerning that the Senate bill now includes a provision that would take affordable health care away from 13 million Americans." She added that it remains to be seen whether tax relief would be temporary and whether the plan can be adopted without increasing the deficit.

"I've long said I want to work with Republicans and Democrats on a tax reform bill that achieves real, lasting relief for the middle income Americans who need it the most," Heitkamp said. "But, so far, partisan politics have won out."

Wind tax credits

Meanwhile, the U.S. wind energy industry is fighting back against a House provision that it said would derail a previous agreement to phase out federal tax credits for wind projects. The change could have significant implications in North Dakota, an industry group said, given that the state's wind energy potential is among the highest in the nation.

Developers can currently qualify for the production tax credit by incurring 5 percent of project costs before starting construction, but the House bill would retroactively remove that option, according to the American Wind Energy Association. The bill would also reduce the PTC's value from 2.4 cents per kilowatt hour to 1.5 cents per kilowatt hour.

The Senate tax bill doesn't modify the PTC. In 2015, Congress agreed to phase out the tax credit over five years.

"We're just asking that Congress keep the phase-out deal in place so that companies have the certainty that their investments won't be undermined," AWEA spokesman Evan Vaughan said.

A spokeswoman for LM Wind Power, which employs 1,000 people at a turbine blade plant in Grand Forks, said they're "deeply concerned" the tax credits were part of the tax reform proposal.

Cramer supports the changes but believes the PTC phase-out will remain intact. He noted that Republican lawmakers are looking to lower corporate tax rates from 35 percent to 20 percent.

"Everybody looks at their particular benefit in a vacuum as though the entirety of the tax plan doesn't have value to them," Cramer said.

John Hageman

John Hageman covers North Dakota politics from the Forum News Service bureau in Bismarck. He attended the University of Minnesota in the Twin Cities, where he studied journalism and political science, and he previously worked at the Grand Forks Herald and Bemidji Pioneer.  

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