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HB 1535 Seeks A Balanced Approach To A Flat Income Tax

Proposed plan looks very similar to Democrat Flat Tax Plan In 2014

This session as with all session there are many bills to cut the state income tax or eliminate it altogether, but one bill in particular stands out as both serious tax reform and sustainable given the current economic conditions of the state.

House Bill 1535 would eliminate all the income tax brackets, exempt all income above $18,700 for single filers and all income above $31,300 for married filers, $25,100 for Head of Household) and place a 2.5% (two & one-half percent) rate on all income after those levels. This would result in an overall tax cut for North Dakotans in the range of $100-150 million every year.

Back in 2014, the Democratic candidate for North Dakota Tax Commissioner proposed a similar Flat Income Tax -Large Exemption approach. (see details below). While the exemptions in HB 1535 are smaller than those proposed in 2014, it would be good for both parties to realize this is a direction that can be bi-partisan.

At that time The Non-Partisan Tax Foundation rated this plan as being a solid approach to tax reform.

The Tax Foundation concluded these changes would move North Dakota from 28th to 11th in the nation for income tax structure and Business Friendly Tax Policy.

If the legislature wants to zero out the income tax, that would be great.

But it is our hope that a more realistic and sustainable approach is to adopt a Flat Income Tax that exempts lower income workers from completely.

HB 1535 is a great step in the direction of Income Tax Reform.

Please contact you legislators and tell them to support HB 1535 by clicking here!


-Dustin Gawrylow, Managing Director

North Dakota Watchdog Network


Analysis: Democrat Proposes Flat Income Tax

September 10th, 2014

Tax reform is a term that sometimes gets used to describe approaches to public policy that really are not reform but just enough to make people think that something is changing.

With North Dakota’s constant tax revenue growth, and the current projected surplus well over $600 million again, the paradigm is shifting away from just nibbling around the edges and playing shell games with tax dollars and towards true reforms.

To illustrate how much things are changing in North Dakota, the Democrat candidate for State Tax Commissioner has proposed a $235 million per year income tax cut that eliminates the top two and bottom two tax brackets, leaves a single 2.52% tax bracket for everyone, and gives single tax filers a $40,000 standard exemption and married tax filers an $80,000 standard exemption.

Under this plan, the exemption is on-top-of the current state tax code and when combined with federal deductions, means that a family with household income of $100,000 would pay zero tax – saving $1,220.

More importantly, this plan eliminates what is often referred to as the progressive income tax – earners no longer will get punished with higher tax rates just because they earn more.

For advocates of good tax policy, this is great news. No longer do we have to argue with Democrats about the need for real and substantial income tax cuts.

This plan really puts Republicans on the spot and creates a new baseline for what to expect in the next legislative session.

Recently, discussions have gotten more serious about the need to eliminate the income tax (which would be the only plan better than a Flat Tax).

Historically, efforts to eliminate the income tax have not done too well.
In 2013, House Bill 1182 was brought by Representative Scott Louser (R-Minot) which would have suspending the income tax for two years, to be evaluated for continuation after that. That bill received 23 votes – barely 1/3rd of the Republicans – and not even close to passing the bill.

In 2011, House Bill 1409 would have eliminated the income tax all together – it got 16 votes.

(Note: Louser is pushing for the income tax rate to be set to 0% for everyone according to this news story. But that's not a sure bet because members of his own Republican Party, like Rep. Andy Maragos are already diminishing the idea as this other news story says.)

There is a long road to pave to get to the point of eliminating the state income tax – but while others continue down this road, the fact that things in North Dakota are so good that even the Democratic Tax Commissioner candidate says it is time for a Flat Tax Revolution in North Dakota should bring hope to taxpayers.

Republicans seem to be in disarray and already bickering among themselves about what their tax policy will be, so it is certainly helpful that a Democrat for statewide office is offering a plan most Republicans could get behind in a heartbeat.

Clearly the time has come for an overhaul, and if the debate is between a Flat Income Tax and No Income Tax, and those are the only two options - then the taxpayers will win either way.

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