BISMARCK — A North Dakota lawmaker plans to introduce legislation to effectively eliminate state income taxes and use earnings from the voter-approved Legacy Fund to replace the lost revenue.
Republican Rep. Craig Headland, who chairs the House Finance and Taxation Committee, said Monday, Jan. 7, his proposal wouldn’t immediately eliminate individual and corporate income taxes but would gradually reduce them as additional Legacy Fund earnings come in. He plans to introduce the bill this week.
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Headland said the legislation helps meet the intended purpose of the Legacy Fund by sharing “some of the state’s excess wealth with taxpayers.” He said it could also boost the state’s economy by serving as a workforce recruitment tool.
“The concept is fairly simple: Use those earnings to replace the income tax, reduce everybody’s tax burden,” Headland said. “That way everybody is sharing in the legacy.”
North Dakota has some of the lowest income tax rates in the country, but neighboring South Dakota and Wyoming don’t impose them, according to the Tax Foundation. The average individual state income tax liability in North Dakota is $866 per return, according to the tax commissioner's office.
A December revenue forecast predicted North Dakota would raise almost $928.7 million in individual and corporate income taxes during the two-year budget cycle that ends June 30. State lawmakers most recently reduced income taxes in 2015 but faced budget cuts the last time they were in session two years ago.
The Republican-controlled Legislature began the 2019 session on Thursday.
Headland’s bill represents one of several ideas for tapping Legacy Fund earnings that have cropped up in recent months. During his budget address last month, Republican Gov. Doug Burgum proposed using $300 million for unmanned aircraft infrastructure, the proposed Theodore Roosevelt Presidential Library and Museum and other projects.
The governor also proposed a state income tax exemption on military retirement pay but did not suggest eliminating the tax altogether.
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Voters agreed to create the Legacy Fund by stashing away 30 percent of oil and gas tax revenue in 2010, but the constitution prevented lawmakers from spending the principal and earnings until mid-2017. State officials invest the fund’s principal.
House Minority Leader Josh Boschee, D-Fargo, worried Headland’s proposal would make state revenues more dependent on what happens in the stock market.
“I’m a supporter of us using the current tax revenues that we have,” Boschee said.
