North Dakota lawmakers should give serious consideration to reviving the sales tax on used farm machinery and parts.
Sen. Tony Grindberg, R-Fargo, wants to end the full exemption, which has been in place for about six months, and direct the revenue to economic expansion programs. In the last four years, the Legislature has phased out the old 3 percent sales tax on used farm machinery and parts. It declined to 1.5 percent in 2001 and was eliminated entirely July 1.
The projected loss in revenues for the next biennium is $17 million, according to estimates made last November by the Tax Department.
The state's budget picture demands that legislators look at sales tax exemptions as possible sources of revenue. The farm machinery exemption is one of several that agricultural interests have secured from the Legislature over decades. Those exemptions and the estimated biennial revenues lost to the state include:
- Commercial fertilizers - $19 million
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- Livestock and poultry feed - $18 million
- Seed - $13.5 million
- Farm chemicals - $19 million
- New farm machinery and parts (calculated at 2 percent) - $13 million.
So even if the used machinery and parts tax were re-imposed, the ag sector sales tax break still would total an estimated $82.5 million over the next biennium.
What about other sales tax exemptions? There are many and the revenue lost because of them is significant. The Tax Department estimates that in the next biennium all sales tax exemptions will cost the state $539.5 million. That's real money which, if it had been collected and wisely managed, likely would have kept the projected state budget in the black. Instead, lawmakers are trying to balance the books.
(Yes, we know that publishing has a sales tax exemption for newspapers, magazine subscriptions, private school Bibles and books, and textbooks purchased by students. The estimated biennial revenue is $5 million. And yes, we believe all sales tax exemptions, other than the food exemption, should be on the table for discussion.)
It takes courage for a legislator -- especially a Republican legislator -- to suggest re-imposition of a tax. But his modest proposal for the used farm machinery sales tax makes sense in light of the state's budget situation. It looks even more sensible when the $82.5 million in other ag sales tax exemptions are taken into account.
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