Three out of five ND taxpayers would pay no state income tax under the flat tax proposal, to be considered by Legislature during 2023 session
Gov. Doug Burgum, State Tax Commissioner Brian Kroshus, House Tax Committee chairman Rep. Craig Headland and fellow legislators today announced a landmark tax relief plan that would replace the state’s individual income tax rates with a single, lower flat tax, saving North Dakota taxpayers an estimated $250 million annually and eliminating the individual income tax burden altogether for nearly 60 percent of the state’s taxpayers.
Burgum, Kroshus and Headland unveiled the Relief for All plan during a Capitol press conference with Lt. Gov. Brent Sanford and members of the legislature’s House and Senate taxation committees, including Sen. Scott Meyer, Sen. Jordan Kannianen, Rep. Glenn Bosch and Rep. Jason Dockter.
Based on the current 2022 tax year, the plan would effectively eliminate the state’s individual income tax for over 388,000 North Dakota taxpayers whose adjusted gross income is $54,725 or less for single filers or $95,600 or less for married couples filing jointly.
Those with higher income levels would pay a flat tax of 1.5%, compared to current income tax rates that range from 2.04% to 2.9%, which translates to a reduction ranging from 26% to 48% in their state income taxes.
Burgum noted that inflation is at its highest level in more than 40 years, competition for workforce is fiercer than ever, and the state’s balance sheet has never been stronger.
“Now is the right time to provide meaningful, permanent tax relief to make our state a more attractive place to work and a more affordable place to live,” Burgum said. “Under this proposal, almost 60% of taxpayers won’t have to pay state income tax, and those who do will see their income tax liability reduced by roughly one-quarter to one-half, allowing North Dakotans to keep more of their hard-earned money to offset expenses and invest in their families and communities.”
“This is the largest income tax relief package in state history and will establish North Dakota as the lowest flat-tax state in the nation, while still retaining a state income tax collection system to fund priorities,” Kroshus said. “All income earners will see measurable relief, increasing disposable income that can quickly enter the North Dakota economy. This is also the most effective tax relief option available at the state level, reaching the most people while providing the highest percentage tax reduction for new families, lower-income filers and those just entering the workforce, including college graduates.”
Legislators will now work with the Governor’s Office, the Office of State Tax Commissioner and Legislative Council to prepare the plan for introduction to the 68th Legislative Assembly, which convenes in regular session on Jan. 3.
“Economic competitiveness has come to the forefront as we address the challenges associated with workforce recruitment and continued economic growth,” Headland said. “This income tax reform is a major step in the right direction as North Dakota works to meet the challenges faced in oil production, agriculture and technology as we further diversify our economy.”
“This tax policy will keep money in our citizens’ pockets and also includes a removal of state income tax for our state’s lowest income earners,” Meyer said. “This will allow more financial freedom to our constituents to use their resources as they see fit.”
The plan announced today expands upon the income tax relief package – proposed in the Burgum-Sanford Accelerate ND plan – that state lawmakers approved and Burgum signed into law last November. That package will provide an estimated $211 million in relief for approximately 500,000 North Dakotans in tax years 2021 and 2022 by providing an individual income tax credit of up to $350 per year for resident individual income taxpayers, or up to $700 per year for individuals filing a married joint return. The Legislature passed and Burgum also signed legislation to exempt Social Security income from state income tax, providing an estimated $14.6 million in savings per biennium to approximately 20,000 North Dakotans.
North Dakota last changed its individual income tax rates in 2015, reducing rates by approximately 10%, from a range of 1.22% to 3.22% to a range of 1.1% to 2.9%.