Republican lawmakers plan to push aggressive tax cuts in North Dakota next year.
Al Carlson, North Dakota’s House majority leader, isn’t satisfied with Republican Gov. Jack Dalrymple’s proposal to cut the individual rate and corporate rates, reported The Bismarck Tribune. Carlson said Monday he plans to introduce a bill in January that would reduce both rates to zero in four years.
“I think it’s important for North Dakota’s long-term economy,” Carlson told The Bismarck Tribune.
And Republican Rep. Scott Louser plans to introduce a separate bill that would reduce the income tax rate to zero, although his plan would leave the corporate rate alone.
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An oil boom has boosted North Dakota’s economy for almost a decade, and the state has capitalized on the boom by levying taxes on oil extraction that fund a substantial part of the budget.
In 2012, $3 billion of the state’s $9.2 billion of total revenue came from taxes levied on oil extraction, reported The Washington Post. And since the boom began in 2006, reported income for all North Dakotan’s has doubled to a record high of $30.4 billion, and the number of taxpayers has increased to 37 percent, reported the Billings Gazette.
Lawmakers from both parties are expected to fight Carlson and Louser’s tax cut bills, in part because oil prices continue to drop and are costing the state revenue.
“I think eliminating the income tax is shortsighted,” Senate Minority Leader Mac Schneider told The Bismarck Tribune.
The price of crude oil has recently fallen from $100 a barrel to just $54, which is already costing the state money in tax revenue, reported The Washington Post. But if the price falls below $52.8 for five consecutive months, North Dakota law requires the state to eliminate the current 6.5 percent extraction tax for more than a year.
The tax would not be reinstated until the price of crude oil returns to a level higher than $52.8 for five months in a row, and would slash the state’s revenue.
Republican Senate Majority Leader Rich Wardner supports reducing income taxes, but told The Bismarck Tribune that 2015 might not be the right time. “I don’t know if this is the time to pull the trigger on it,” Wardner said.
Tax Commissioner Ryan Rauschenberger estimates reducing the income tax rate to zero would cost the state about $1 billion over two years, reported The Bismarck Tribune.
Seven states do not have an income tax, including South Dakota, Texas, Alaska, and Washington. Most rely on a sales tax to make up for the lost revenue.
North Dakota currently has a top income tax rate of 3.22 percent and a corporate rate of 4.53 percent.
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