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Published September 20 2012

High rates of North Dakotans, Minnesotans do pay taxes

FARGO – Amid a national political debate over who does and doesn’t pay federal income taxes, North Dakotans and Minnesotans are largely in the former category.

About 74 percent of North Dakotans paid some federal income taxes in 2010, according to the most recent data published by the Tax Foundation, a Washington, D.C.-based research group. That’s the second-highest rate in the nation, behind only Alaska.

In Minnesota, 71 percent of people paid federal income taxes, the nation’s ninth-highest rate.

The issue, long simmering in some quarters, became a flashpoint this week after Republican presidential nominee Mitt Romney was captured on video saying 47 percent of Americans pay no income tax and are “dependent on the government” and “believe they are victims.”

The 47 percent figure was roughly in line with a report from the Tax Policy Center, another Washington group, that said 46 percent of Americans paid no federal income taxes in 2011.

That encompasses a broad cross-section of the nation, from low-income families that get tax credits to tens of millions of Social Security recipients to thousands of millionaires who rely on accounting strategies.

Neither North Dakota nor Minnesota is awash in high earners: About 60 percent of Minnesotans and 62 percent of North Dakotans who filed 2010 returns reported adjusted gross incomes of less than $50,000.

And the single largest group of filers in both states – 37 percent in Minnesota, 38 percent in North Dakota – had an adjusted gross income of less than $25,000.

But both states also have below-average unemployment rates and high participation in the labor force.

Stan Herren, an economics professor at North Dakota State University, said that means people generally are working and earning enough to owe taxes.

“Part of it is that we just have a very strong economy right now,” Herren said. “People are earning salaries and thus may be subject to the federal income tax.”

Kathy Strombeck, director of research and communications for the North Dakota’s Tax Department, said the state has benefited from the rapid addition of good-paying jobs that create tax liability.

And many of those jobs are in sectors such as agriculture and energy don’t lend themselves well to aggressive tax-avoidance strategies.

She also said while North Dakotans aren’t opposed to claiming tax credits, they’re loath to reduce their tax burdens with methods they consider loopholes.

“If they’re perceived of as loopholes or probably at all shady, North Dakotan are probably not going to participate,” she said.

Readers can reach Forum reporter Marino Eccher at (701) 241-5502