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Lloyd Omdahl, Published May 19 2013

Omdahl: Tax cuts go out of state

The legislative leadership responsible for the big tax cuts is calling them “the largest tax-relief package this state has ever seen.”

The statement is true as far as it goes. But the $1.1 billion cut in property and income taxes is not necessarily for the residents of North Dakota. Much of this

$1.1 billion will be leaving the state.

First, there are the cuts on agricultural property. The state tax department has estimated that around 25 percent of North Dakota land is held by out-of-state owners. However, on the basis of the amount of oil royalties going to landowners, other observers figure that out-of-state ownership could be as high as 40 percent.

In any case, of the $850 million in property tax reductions, out-of-state landowners will be taking at least $200 million of the tax cuts. This will be spent in other states.

Then there are the cuts on commercial property. National chain stores now dominate the North Dakota retail market. Add this to the property tax relief given the railroads, telephone companies and other utilities.

Commercial property owners will be claiming another huge portion of the $850 million, perhaps as much as another $200 million. A significant chunk of the $250 million in corporate income tax cuts will all also go out of the state.

These cuts will not benefit North Dakota but will be absorbed in bottom lines in Minneapolis, Chicago, Arkansas or maybe overseas.

So when we claim that North Dakota people will see more than $1.1 billion in tax relief, we must acknowledge that the claim is being stretched considerably. A substantial amount of this tax relief will not be seen in North Dakota.

Actually, there were better ways to give tax relief and use it to build North Dakota. As we watched the Legislature vacillate through the session, it was obvious that there was no long-range plan in mind. Decisions were made more on impulse than reason.

The homestead credit should have been given more serious consideration. A homestead credit can be promulgated in a variety of ways.

It could be an automatic cut in residential valuation. The assessment on a home for $200,000 could be cut by a flat $100,000 as a homestead credit, leaving the other $100,000 as the taxable valuation. Or it could be administered as a cash credit against property taxes due.

In the past, some farmers have complained that the homestead credit system wouldn’t give them any of the tax-cut benefits because their residences already have a 100 percent homestead credit and their land is assessed, according to the latest sales-ratio study, at one-third the market value of city residences.

As I have stated before, I don’t begrudge them these benefits because we need tax policy that protects the rural fabric of our state. Unfortunately, we do not have a statewide plan to stabilize more segments of rural North Dakota.

We have 240 communities with a population of less than 300 struggling to survive. Businesses are closing doors; health care is disappearing; schools and churches are consolidating.

If we treasure the lifestyle of rural communities, the folks in charge of cutting taxes should be giving more consideration to a tax program that benefits rural communities, locally owned businesses, rural health care providers and farmers.

While this may seem overly parochial, we must remember that this is primarily oil money we are talking about. We have no obligation to donate this legacy to all comers. Rather, we have an obligation to be responsible stewards of a nonrenewable resource for future generations.

For once, we can ask ourselves: “What kind of North Dakota do we want?” Then we can make it.


Omdahl is a former North Dakota lieutenant governor and a retired University of North Dakota political science teacher. Email ndmatters@q.com