Tax cuts seem imminent in ND thanks to $750 million surplus, but are they fiscally responsible?

Published: Sep. 27, 2022 at 7:02 PM CDT
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BISMARCK, N.D. (KFYR) - North Dakota will likely have a $750 million surplus by the time the two-year budget cycle ends in June of next year. And that has lawmakers chomping at the bit to pass costly legislation.

North Dakota is in a good place financially. While some parts of the country are facing dire economic circumstances, lawmakers in Bismarck will likely be arguing about what type of tax breaks to implement. As of now, legislators have some big ideas about what to do with our surplus next session.

Tax cuts. That’s just one big-ticket item that’ll be on the docket in January.

“In times of high inflation, I think it’s important that taxpayers have all the money that they deserve, that they’ve earned, at their disposals,” said Representative Craig Headland of Montpelier.

But political leaders disagree on where tax relief should come from. Governor Doug Burgum’s proposal would eliminate income tax for 60% of North Dakotans — and cost $500 million per biennium.

“This actually affects more North Dakotans if you lower income tax because there are more people in North Dakota — that 60%, where we’re eliminating their [income] tax? 60% of North Dakotans don’t pay property tax,” said Governor Doug Burgum.

Senator Donald Schaible’s proposal has a price tag of $340 million per biennium and would lower property taxes by 25% statewide.

“We think [property tax reform] is more relevant and more personal and a better choice for that,” said Senator Donald Schaible of Mott.

The governor also plans to address what he sees as an overburdened childcare system.

“We’ve put together a framework that could turn childcare from a workforce challenge to a workforce advantage,” said Governor Burgum.

But according to the nonpartisan Legislative Council, the state is consistently spending more than it collects in revenues, and these several-hundred-million-dollar proposals would further exacerbate that problem.

“To the extent possible, we should use one-time revenues for tax relief and spending needs in order to limit the impact to ongoing revenues and spending,” said Allen Knudson, a budget analyst for the Legislative Council.

But proponents of tax breaks say maybe less spending is exactly what the state government needs.

“In strong economic times there is a propensity to overspend, and I think this is going to help us with that in the future,” said Representative Headland.

The Legislative Session will begin in January.

According to the Office of Management and Budget, this year’s $750 million surplus will be the fourth highest in the past 20 years.