NEWS RELEASE 

 

in State and Local Taxes

State’s Budget Surplus Offers Opportunity to Improve State Tax Policies

 

 

BISMARCK---Low and middle income families in North Dakota pay a far higher share of their income in state and local taxes than do their richer North Dakota neighbors, according to a new study by the Institute on Taxation and Economic Policy (ITEP).

 

“This report shows why property taxes have been an issue for many North Dakotans the past few years. Middle and lower income families pay more of our income in property taxes than we do in income taxes. For the wealthiest people, it is just the opposite,” said Don Morrison, executive director of the nonprofit, nonpartisan North Dakota Center for the Public Good.

 

It is highly unlikely that anyone would design an income tax with lower rates for those with the most income, Matthew Gardner, Executive Director of ITEP and author of the study, noted. “But,” he said, “that is exactly what North Dakota’s tax system overall does: It allows the very wealthiest individuals to contribute less of their income, on average, than middle- and lower-income families must pay.”

 

The report found that North Dakota families earning less than $21,000 – the poorest fifth of North Dakota non-elderly income earners – pay 9.5% of their income in state and local taxes. By contrast the richest North Dakota taxpayers, with average incomes of $1, 014,300, pay only 5.1%. When this happens it is called a regressive tax system.

 

Middle income taxpayers in North Dakota don’t do much better than low-income families. Those earning between $35,000 and $59,000, pay 8.2% of their income in North Dakota state and local taxes.

 

The main reason for the unfairness of North Dakota taxes is the state’s reliance on regressive sales and excise taxes, which fall disproportionately on the worst-off families, and on property taxes. The state’s one progressive tax, the income tax, is not enough to offset the unfair impact of these other taxes.

 

Morrison said, “We have done much better in the past when it comes to who pays taxes in our state, so we certainly know we can change tax policy towards more fairness in who pays. We do have choices. The fact we have a large state budget surplus in North Dakota – as a result of high oil prices and good prices for some ag commodities – gives us the opportunity in the next few years to make adjustments in the fairness of our taxes.”

 

Gardner said, “The biggest difference between North Dakota and other states is that North Dakota’s income tax is really low. That [income tax] is the option North Dakota has to offset regressive taxes. Relying more heavily on income taxes, and less on regressive sales and excise taxes, could help make the North Dakota tax system substantially less unfair.”

 

The North Dakota fact sheet is attached.

 

The North Dakota fact sheet and the full  ITEP report, Who Pays: A Distributional Analysis of the Tax Systems in All 50 States, are available online.

 

For the North Dakota specific fact sheet: http://www.itepnet.org/wp2009/nd_whopays_factsheet.pdf.

 

For the full report:

 

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