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Erik Burgess, Published October 16 2012

North Dakota Democratic candidates advocate lifting state’s clothing sales tax

FARGO – The state sales tax on clothing in North Dakota would be lifted under the proposal Democratic legislative candidates here announced Tuesday.

It’s an effort to redistribute some of the budget surplus and keep retailers competitive with bordering states, said the District 46 legislative candidates who proposed eliminating the 5 percent state sales tax.

“It’s a fair way of spreading out some of this wealth that the state has,” said Diane Hill, a candidate for House in south Fargo’s District 46. “Everybody benefits by having a tax taken off clothing, warm clothing here in North Dakota.”

The trio of Democratic challengers in District 46 – Hill and Lee Myxter for the House seats and George Sinner for the Senate seat – said they would sponsor the legislation in the 2013 session and said it would save taxpayers statewide $30 million per biennium.

Eliminating the sales tax on clothing has been proposed in North Dakota in the Legislature’s past two sessions. In 2009 and 2011 the idea was voted down by the Senate, largely because those measures also eliminated locally controlled sales taxes, said Alison Kelly, legislative director for the North Dakota Democratic-NPL.

This proposal would only eliminate the 5 percent state-controlled sales tax on clothing.

So, for instance, the half-cent tax levied by Cass County for flood mitigation would not be eliminated.

“It exempts the local part of the sales tax so that certain local cities and counties can continue to provide services that they count on based on their budgets on sales tax revenues,” said Rep. Scot Kelsh, D-Fargo, who is running for state auditor and backs the sales-tax proposal.

Although proposed by Democrats, the idea is not necessarily meeting resistance from Republicans.

Rep. Jim Kasper – one of the three GOP incumbents in District 46, along with Sen. Jim Roers and Rep. Kathy Hawken – said he would not oppose any proposals to reduce taxes and agreed the proposal would help business owners.

But Kasper said he is focusing on property tax and income tax relief.

“The people are frustrated with property tax,” he said. “I haven’t had anybody talk to me about wanting a sales tax reduction, and we’d be one of the few states that don’t tax clothing.”

Kasper said property tax reduction would be a much larger relief for taxpayers, and even renters would see savings because landlords would pass down the reductions to them.

Hill disagreed, saying clothing tax affects everybody regardless of whether they rent or own property.

“When property tax goes up, I know that the owners pass it on to the renters,” she said. “I do not have faith that it will work vice versa.”

North Dakota is bordered by two states that do not have sales tax on clothing – Montana and Minnesota.

Moorhead retailers depend on that tax advantage, said Chuck Chadwick, executive director of the Moorhead Business Association. He estimated that at least 30 percent of retail business in Moorhead comes from Fargo.

“It would, over time, take away one more reason why people would travel to Moorhead,” Chadwick said. “You die from a thousand cuts, and that would be another cut for Moorhead if North Dakota would do that.”

Not all agree Moorhead would be negatively affected, though. Renee Thomas, manager at the Moorhead Center Mall, said the mall would not lose business because of the unique stores it houses – like Glicks and The Classic.

“I don’t believe it affects business at all for us because we have different shops,” she said of the mall. “We’re not West Acres. We’re small boutique style shops.”

She added that she believes Herberger’s, an anchor store in the Center Mall, does great business on both sides of the river.

Chadwick argued that the proposal would at least eliminate traffic to the Moorhead side, which would affect impulse sales.

“When you have fewer people, you have fewer impulse sales, and impulse sales in the retail business is huge,” he said, estimating that 50 to 60 percent of purchases in retail are on impulse.

Readers can reach Forum reporter Erik Burgess at (701) 241-5518