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By TJ Jerke, Forum News Service, Published April 30 2013

North Dakota tax cut packages remain on the table

BISMARCK – The Legislature’s promise to provide tax relief for North Dakota residents still hangs in the balance during the session’s final days, and large tax cut packages have yet to be passed.

Sen. Dwight Cook, R-Mandan, chairman of the Senate Finance and Tax Committee, has said throughout the session that the Legislature will provide $1 billion in tax relief, and points to four remaining bills that total more than that mark.

Gov. Jack Dalrymple’s property tax relief proposal under a new K-12 funding formula has $714 million attached, while another one of his proposals carries $250 million in income tax cuts. A measure to expand the state’s homestead tax credit carries $20 million, and a bill to reduce local mill levies through county social services has $20 million in property tax relief.

Rep. Craig Headland, R-Montpelier, is vice chairman of the House Finance and Tax Committee and also sits on the K-12 conference committee. He is not convinced property taxes alone will be enough to provide relief for North Dakotans.

Headland sponsored House Bill 1250, which was defeated Tuesday in the Senate. The bill would have provided $251 million in individual income tax relief and $101 million in corporate cuts. The bill started with Dalrymple’s proposal of $150 million in cuts for corporations and $361 million for individuals.

“I don’t think there is a better way to provide tax relief than income tax,” he said, convinced that property tax relief alone won’t be enough.

But Headland said he was glad the House hung onto Senate Bill 2156, which lowers income tax rates for individuals and corporations, providing an estimated $250 million in savings.

He said income tax is the better option because it can’t be undone by local governments.

“It’s all about coming to an agreement on the best way to do it,” he said.

Dalrymple has been pushing House Bill 1319, his proposal to provide $714 million in property tax relief while giving school districts more state funding.

The bill creates fewer, more flexible local property tax mill levies while increasing the state’s share of education per student.

The bill will likely be passed out of its conference committee this morning, and then it will have to be approved by the House and Senate.

Sen. Tim Flakoll, R-Fargo, who sits on the conference committee, called $714 million a “monster of a number in property tax relief.”

The bill combines the K-12 funding formula with property tax relief and “provides uniformity and allows for a quality education to still occur.”

“There’s something to be said for a state that will do that for its people,” he said. “We need to give it back. It will keep our economy strong and is something more states need to do if they have the opportunity.”

Oil taxes

The state’s oil extraction tax may drop from 6.5 percent to 6 percent for wells drilled after June 30, costing the state about $280 million in the first four years, according to Tax Department estimates.

House Bill 1234 has been largely contested since it was introduced to close various tax loopholes oil companies have had as part of an incentive to draw them into the state.

The bill was passed out of conference committee Tuesday afternoon with a 4-2 vote, with the two Democrats dissenting, arguing that the oil companies are not giving up enough and the bill won’t close the tax loopholes.

It still needs approval of the full House and Senate.

The bill sets a trigger price at $52.40 per barrel of oil for a full calendar month. If the price of oil drops below that threshold, the tax rate on oil will sharply decline.

The tax decreases are designed to compensate for the bill’s provision that changes the definition of a low-producing well, also known as a stripper well, which is eligible for tax exemptions. A well deeper than 10,000 feet would have to produce fewer than 35 barrels per day, up from the current level of 30 barrels per day, among other provisions.

Sen. Connie Triplett, D-Grand Forks, has been adamantly opposed to oil tax breaks, saying they should have been paying more taxes all along.

“I don’t think we owe them anything,” she said.

Headland, the chair of the bill’s conference committee, said the loopholes are justified since they benefit the state and oil companies alike with forecasted state tax revenues that will still provide the state with the ability to address its needs.

“There may be a point where they look at the taxes versus the cost and see that everything is too high and pull their rigs to another play,” Headland said.