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Officials: Heat tax should be repealed

North Dakota should join the majority of states and drop its tax on home heating fuels, two Public Service Commissioners said Wednesday in Fargo. The 2 percent tax is hard to defend philosophically because heating one's home in this climate is no...

North Dakota should join the majority of states and drop its tax on home heating fuels, two Public Service Commissioners said Wednesday in Fargo.

The 2 percent tax is hard to defend philosophically because heating one's home in this climate is not a choice for residents, said Tony Clark, president of the Public Service Commission.

He and fellow commissioner Kevin Cramer proposed lawmakers repeal the tax when they meet again in 2007.

Rep. Merle Boucher, D-Rolette, the House minority leader, supported the idea but said it wouldn't do people any good for at least two winters.

"I'm more concerned with what happens now and next winter before the next Legislature meets," he said. "I'm going to say there's a little grandstanding here because (the tax repeal proposal) doesn't take care of any immediate concerns."

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Natural gas expenses for the average household this winter are expected to jump 41 percent from last year, according to the federal Energy Information Administration.

Homes using heating oil can expect to pay an average of 27 percent more; those with propane can expect to pay 21 percent more.

Cramer agreed the state tax issue doesn't offer immediate help but said it's better to start talking now rather than later. He said the governor has done what he can to address the immediate concern of high heating costs this winter.

Gov. John Hoeven announced last week that the state will put another $5 million into the low-income home energy assistance program with money from human services' $1.6 billion budget.

Currently, all residential natural gas bills are subject to a 2 percent state sales tax, with revenue put toward the state's general and aid distribution funds.

Other home heating fuels, such as propane and heating oil, are subject to a 2 percent special fuels tax that goes toward the state highway tax distribution fund.

Revenue from the taxes this year could approach $7 million, Clark said.

Twenty-nine states do not tax residents for heating fuel, Clark said. Minnesota is among those that do; its 6.5 percent sales tax on natural gas and electricity is the highest among states, Clark said.

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Fargo is also a rarity in the state because of its local tax on heating fuels, the commissioners said. A majority of cities, Bismarck included, have waived their sales tax and franchise fees for home heating costs, Clark said.

In Fargo, residents pay the city's 1.5 percent sales tax on gas and electricity, as well as a 2 percent city franchise fee, which Xcel passes onto customers, said Bonnie Lund, a company spokeswoman.

City Commissioner Linda Coates, when asked Wednesday about the local taxes, said it would be worthwhile to consider whether or not Fargo should exempt home heating costs for residents.

Readers can reach Forum reporter Dave Forster at (701) 241-5538

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