First bill aimed at income tax cuts heard in ND legislature
BISMARCK — Lawmakers in oil-rich North Dakota heard Tuesday the first in a large batch of bills aimed at cutting or eliminating personal income taxes, with the main sponsor pitching it as a way to benefit renters who have missed out on property tax relief.
North Dakota's income tax collections have more than doubled in the last decade, from $214 million in fiscal year 2004 to $514 million in fiscal year 2014, despite the Legislature cutting income taxes at double-digit rates across all brackets in the past three sessions.
As of Tuesday, 30 bills proposing income tax changes had been filed, a handful containing broad-based reduction or elimination of tax rates.
Sen. David Hogue, R-Minot, said his Senate Bill 2212 targets the bottom income tax bracket out of fairness to renters who haven't shared in the property tax relief approved over the past six years, including a 12 percent state buydown of local property taxes approved by the 2013 Legislature. Gov. Jack Dalrymple's spending plan includes one-time funding of $250 million to continue the buydown in the next biennium.
"We've left out a major segment of our state population," Hogue testified before the Senate Finance and Taxation Committee.
Co-sponsored by five other Republicans, his bill would reduce the tax on the state's bottom income bracket from 1.22 percent to zero percent. Hogue said that doesn't seem like a large cut, but it would eliminate the tax liability for about 170,000 of the state's 465,000 filers, according to the state tax commissioner's office.
A single person earning less than $36,250 would have no income tax liability, while the first $62,600 in income for a married couple filing jointly would be exempt from income tax. The bill's fiscal note is $151 per year
The tax cut would cost the state an estimated $151 million a year and would end after two years, Hogue said.
Jon Godfread, a lobbyist for the Greater North Dakota Chamber, testified against the bill because it contains no corporate income tax cuts and targets only one bracket.
"We're going to be advocating for the most relief we can possibly get," he said.
Hogue's bill isn't the only one designed to give renters a break. A bipartisan bill led by Democratic Sen. Tyler Axness of Fargo, Senate Bill 2230, would more specifically target tenants by creating a renter's income tax credit equal to 15 percent of annual rent paid, up to $900 a year.
"They deserve the same breaks that we've given other people who own property," he said, noting the bill was inspired by skyrocketing rents in the Oil Patch and rapid growth in his own district.
State Tax Commissioner Ryan Rauschenberger said a bill will be filed soon containing the governor's plan to provide $100 million in individual income tax relief by reducing all five rates by about 10 percent, and $25 million in corporate income tax relief by dropping those three rates by about 4.8 percent.
House Majority Leader Al Carlson, R-Fargo, said Tuesday he won't introduce a previously announced bill to phase out both personal and corporate income taxes over a four-year period, citing an already crowded field with three income tax bills. Instead, he offered his draft bill for consideration as amendments.
Minot Republican Rep. Scott Louser's House Bill 1167 proposes the most severe cut in income taxes. It would reduce personal income tax rates to zero and flatten the state's income tax brackets from five to one at a projected cost of nearly $1 billion over two years.
Hogue, an attorney, said he's against eliminating the income tax, calling it an "eminently fair" system of taxation.
To those who would question why the state should cut taxes again during a time of uncertainty over oil prices and state revenue, he said it's important to remove revenue from the table to promote sound spending decisions.
"Legislative bodies are not inclined to say 'no,' " he said.
Reach Nowatzki at (701) 255-5607 or by email at firstname.lastname@example.org.