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North Dakota Cuts Income Tax; Missouri Considering

By: Joseph Bishop-Henchman

Last year, we noted that North Dakota was one of the few states with a structural budget surplus, thanks to flush revenues from the personal and corporate income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es. In November 2008, a ballot initiative to cut these rates did not pass, partly because of concerns about whether it would interfere with a separate push to cut property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es. Now, however, Gov. John Hoeven has approved a much more modest cut in the two taxes, retroactive to January 1, 2009:

North Dakota Individual Income TaxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. , 2009
Single Person

Income Bracket

Pre-Cut Rate

Post-Cut Rate

>$0

2.10%

1.84%

>$33,950

3.92%

3.44%

>$82,250

4.34%

3.81%

>$171,550

5.04%

4.42%

>$372,950

5.54%

4.86%

Married Filing Jointly & Surviving Spouse

Income Bracket

Pre-Cut Rate

Post-Cut Rate

>$0

2.10%

1.84%

>$56,750

3.92%

3.44%

>$137,050

4.34%

3.81%

>$208,850

5.04%

4.42%

>$372,950

5.54%

4.86%

North Dakota Corporate Income TaxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. , 2009

Bracket

Post-Cut Rate

>$0

2.10%

>$25,000

5.25%

>$50,000

6.40%

The corporate cut also eliminated two unnecessary brackets, and is estimated to reduce corporate tax collections by $10 million per year. The individual income tax cut is estimated to reduce collections by $90 million per year. Also enacted was property tax relief imposing a statewide rate cap and mandating reductions to be backfilled by state funds. $295 million has been reserved for the purpose for 2011-13.

Missouri’s House of Representatives on April 30 also passed a bill to cut each individual income tax bracketA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. by 0.5 percentage points, retroactive to January 1, 2009. The bill has not yet been voted on by the State Senate.

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