One big area that will be affected is the various tax cut proposals. Already some pundits are waving the white flag of surrender, saying the plan to zero-out the state income tax will likely be set-aside. While that may be, supporters of that plan should not give up too easily – after all, if the declines in oil prevent large tax cuts, why should the massive spending of the past eight years be fine?
Just this week, the House Finance and Tax Committee heard testimony on the various income tax cut plans.
I spoke in favor of continuing down the road of cutting income taxes as a means of creating a “soft landing” for this economic downturn the state will be feeling, just as the national economy is rebounding.
I told the committee:
We can zero-out the income tax, either immediately or in phases – to say that we can’t because we don’t know what will happen with oil tax revenues ignores the fact that question was not applied to the rate the legislature increased spending in recent years.
If zeroing out immediately is too difficult to do, a phase out plan that gives the next session the ability to re-evaluate the 1st phase of tax cuts, without reversing the reductions would be acceptable. Or, basing the phases on triggers of overall revenue would be acceptable.
The middle ground, from both a reform and relief standpoint is HB 1296 which takes us to a Flat Tax with medium-sized exemptions for everyone at the bottom. (In my view, the exemptions should be larger, but the overall reform structure of the bill is very good.)
(House Bill 1296 was introduced by Rep. Kim Koppelman (R-West Fargo), co-sponsored by all Republicans, but is very similar to the plan the last Democratic candidate for tax commissioner proposed – an idea which Democratic House Minority Leader Kenton Onstand endorsed.)
