North Dakota is in an interesting place because of oil 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. revenue; the budget surplus is $614 million and growing. But while other natural resource states often go without one of the major taxes, North Dakota has all of them, and they aren’t particularly well-structured. South Dakota, by contrast, doesn’t even have a corporate or 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. , and its sales tax rate is lower than North Dakota’s.
That’s why the tax commissioner race in North Dakota is one to watch. In the past few weeks, Jason Astrup, the Democratic-NPL candidate for tax commissioner, has announced a platform of a substantial income tax overhaul. His plan would flatten and simplify the individual income tax to a single bracket, while lowering the top rate from 3.22 percent to 2.52 percent. The exemption would be raised to $40,000 for singles and $80,000 for married filers.
Here’s how the plan would score in our State Business Tax Climate Index if it had been enacted last year:
| 2014 Index Rank | With 2.52% Flat Tax | |
| Overall | 28 | 11 |
| Corporate | 22 | 22 |
| Individual | 38 | 10 |
| Sales | 21 | 21 |
| Unempl. Insur. | 19 | 19 |
| Property | 2 | 2 |
Currently, South Dakota ranks 2nd best on our State Business Tax Climate Index, and North Dakota ranks 28th, but under the Astrup proposal, North Dakota would move up to 11th overall. This plan is a common-sense step toward a simpler, more rational income tax code, and I’d love to see this kind of thinking carried over into conversations about the state's multi-bracket corporate income tax as well. For now though, kudos to Astrup on a well-thought out proposal.
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