Tax Foundation Releases Report on North Dakota Ballot Initiative

This November 4, North Dakota residents will vote on Measure 2, an initiative that lowers individual income tax rates by 50 percent across-the-board, and corporate income tax rates by 15 percent. A new Tax Foundation Fiscal Fact, "North Dakota's Measure 2: How Would Rate Cuts Affect the Peace Garden State's Competitiveness?," evaluates the rate cuts proposal.

According to the Tax Foundation's State Business Tax Climate Index, North Dakota's tax system is about middle-of-the-pack both nationally and regionally. But when nearby states offer more inviting tax climates, capital, entrepreneurs and workers are likely to flow that way. Some anecdotal evidence suggests that this is happening to North Dakota. Measure 2 could improve North Dakota's ability to keep and attract jobs and investment.

The Tax Foundation takes no position on what the optimal amount of government spending is, but North Dakota has had several years of strong growth in tax revenues and that suggests that Measure 2 can be afforded. Strengthening this observation is the example of neighboring South Dakota, which has only one of the three major taxes. North Dakota should be especially careful about ratcheting up government spending permanently, which could store up trouble for the future. The state should also be warned against using the surplus for economic development subsidies or one-time rebates, both of which usually cover up a broken tax system.

Read the full report here.