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Dale Wetzel, Associated Press, Published January 25 2011

North Dakota Legislature considers tax-cut measures

BISMARCK – North Dakota lawmakers on Monday began considering a raft of measures to cut taxes, including proposals to lower individual and corporate income tax rates and a tax deduction for college student loan payments.

The state’s finances, which include a projected

$1 billion budget surplus in June, allow ample room for tax reductions, said Rep. Wes Belter, R-Fargo, the chairman of the House’s Finance and Taxation Committee.

“I expect to turn some bills out of the House recommending some substantial reductions, in income (tax) as well as probably corporate,” Belter said.

Gov. Jack Dalrymple’s budget recommendations to the Legislature include a small tax reduction that would whittle all five of North Dakota’s individual income tax rates by 0.21 percentage points. Sen. Dwight Cook, R-Mandan, has sponsored legislation to implement the reduction, which is pending in the Senate.

Under the Republican governor’s proposal, the lowest individual income tax rate would decline from 1.84 percent to 1.63 percent, while the top rate would fall from 4.86 percent to 4.65 percent. The cuts would save North Dakotans about $50 million in income tax payments over two years.

Republican and Democratic lawmakers have offered alternatives. Rep. Jerome Kelsh, D-Fullerton, the House minority leader, has introduced a bill to exempt a person’s first $40,000 of income, and a couple’s first $50,000, from the state income tax entirely.

Kelsh said he wanted to focus the tax break on lower-income North Dakotans.

“I don’t think (state) income tax, to the top level of income earners in North Dakota, is really a problem,” Kelsh said in an interview. “Maybe their federal is different, but North Dakota income tax is not very burdensome to anyone.”

Reps. Dan Ruby, R-Minot, and Jim Kasper, R-Fargo, have proposals that offer larger income tax cuts than the governor’s proposal.

Ruby’s legislation would slash corporate and individual income taxes by 60 percent. The state Tax Department estimates it would reduce income tax collections by $634.7 million over two years. It would also cut taxes on so-called “pass through” income that individuals receive from partnerships and limited liability companies.

Ruby’s bill would cut the top corporate tax rate from 6.4 percent to 2.56 percent and reduce all five of North Dakota’s individual income tax rates below 2 percent. The top income tax rate would fall from 4.86 percent to 1.94 percent.

Kasper’s legislation would cut individual income tax rates by 15 percent, bringing down the top rate from 4.86 percent to 4.13 percent. It would save North Dakota income taxpayers about

$99 million over two years.

“All these income tax cut bills, I hope we get some passed,” Kasper said in an interview. “We’ve got to give the money back to the people, instead of spending it here in the Legislature.”

Rep. Craig Headland, R-Montpelier, has introduced a corporate tax cut that would replace North Dakota’s three corporate tax rates, which range from 2.1 percent to 6.4 percent, with a flat 5 percent tax and an exemption for a corporation’s first $75,000 of income. The legislation would save companies about $46.5 million in tax payments over two years, the Tax Department estimates.

The Finance and Taxation Committee held hearings Monday on the bills introduced by Ruby, Kasper and Headland, along with a bill offered by freshman Rep. Joe Heilman, R-Fargo, that would allow North Dakotans to deduct up to $2,000 each year in college student loan repayments from their state taxable income. Only graduates who stay in North Dakota would be eligible.


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