North Dakota officials propose flat income tax rate, eliminating individual income taxes for most taxpayers

BISMARCK, N.D. — Gov. Doug Burgum and different officers introduced a plan to save lots of North Dakota taxpayers an estimated $250 million yearly by switching to a single flat price that may get rid of the person state earnings tax for nearly 60% of taxpayers.

The plan, outlined Tuesday, Aug. 24, would successfully get rid of the state’s particular person earnings tax for greater than 388,000 North Dakota taxpayers whose adjusted gross earnings is $54,725 or much less for single filers or $95,000 or much less for married {couples} submitting collectively.

If authorized by the North Dakota Legislature, which convenes in January, the tax aid plan would take impact for the 2023 tax yr and would group North Dakota amongst 10 states with a flat earnings tax price.

Burgum touted the proposed flat tax price of 1.5%, which he known as “everlasting, significant aid,” because the lowest within the nation that may improve the state’s enterprise competitiveness and entice staff.

The proposal requires eliminating the bottom state earnings tax bracket for people, which officers stated would assist working-class taxpayers. Those that proceed to pay the state earnings tax would see reductions starting from 26% to 48%.

“Each North Dakota taxpayer will profit from this,” Burgum stated.

The state’s budgetary coffers are brimming at file ranges, together with a finances stabilization fund that had a steadiness of $724.1 million, the strategic funding and enchancment fund that had a steadiness of $689 million and the Legacy Fund that had a steadiness of $8.2 billion, all as of Might 31.

Revenues thus far for the biennium are working 20.5% above forecast.

“Backside line, the state’s doing extraordinarily effectively,” Burgum stated. “Now could be the proper time to supply significant, everlasting tax aid.”

Passage of the earnings tax aid bundle would imply the state couldn’t hoard as a lot money and would place future restraints on the expansion of state authorities, he stated.

“It doesn’t make sense for the state to maintain stockpiling extra cash,” the governor stated. “We have to get it again within the fingers of the residents.”

The proposed flat tax is the fruits of years of tax aid work, in keeping with Lt. Gov. Brent Sanford. “It took lots to get right here,” he stated.

“We’re on the level once we can afford to do that,” he stated, including that officers will try to sometime get rid of the state particular person earnings tax. Final yr, lawmakers handed a $211 million tax aid bundle for about 500,000 North Dakota taxpayers in 2021 and 2022 by offering an earnings tax credit score as much as $350 per yr for particular person earnings taxpayers, or as much as $700 per yr for married {couples}.

Through the years, state officers have offered greater than $7 billion in property tax aid, a few of it everlasting, Burgum stated, noting property taxes are levied by native governments, not the state.

Brian Kroshus, state tax commissioner, stated that below present charges, 16.1% of North Dakota taxpayers pay no particular person state earnings tax. Underneath the proposal, that may soar to 57%.

“Nobody goes backwards,” Kroshus stated. “Everybody advantages.”

Rep. Craig Headland, R-Montpelier, chairman of the Home Tax Committee, famous extra states have moved to a flat tax however stated North Dakota will stand out for having the bottom price.

“With this invoice, we may have the bottom flat tax within the nation,” he stated, including his purpose is to carry the speed to zero.

Legislative leaders and different members of the Home and Senate taxation committees attended the announcement, apparently reflecting broad help for the flat tax proposal. Republicans have supermajorities in each legislative chambers.