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RALPH KINGSBURY: As growth continues, keep fingers crossed

Let's start with a word of warning about the new health care bill and its effects on state and local taxes. As House Speaker Nancy Pelosi said, "We have to pass the bill so that you can find out what is in it." Here are three things that are in i...

October economic data

Let's start with a word of warning about the new health care bill and its effects on state and local taxes.

As House Speaker Nancy Pelosi said, "We have to pass the bill so that you can find out what is in it." Here are three things that are in it that will affect many people in the area.

First, there is a 10 percent tax on tanning services. Second, there is a 3.8 percent tax on investment income if an individual makes $200,000 or more that year. That can include some portion of the gains realized on the sale of a home, especially if the home is a property (such as a lake cabin) that is not the taxpayer's principal residence.

If we distinguish excise taxes (which are levied on the quantity of a product, such as a pack of cigarettes or a gallon of gas) from sales taxes levied on a product's price, then I believe the "tanning tax" may be the first time the federal government has imposed a sales tax.

Speaking of sales taxes, they are a very important source of income for state and local governments. Do our state and local taxing authorities need the competition from the federal government? Now that is a philosophical comment, I guess. The exception proves the rule.

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But back to the subject of state and local sales taxes: First, a decent year continues for building in Grand Forks. Second, sales tax collections were good, but I remind Herald readers of the comment the Grand Forks Finance Department puts in its announcement each month: "Accept one month's receipts with caution."

One large retailer remitting the sales taxes they collected a little early or a little late can throw things off quite a bit.

So, the best category for making comparisons is the 12-month rolling average. That does the best job of averaging out any timing issues. In this case, the 12-month rolling average shows that even with a good September, we are a little more than 1 percent behind last year's collections.

And three years ago at this time (collections through September) we were more than 8 percent ahead in the 12-month rolling total. This means sales tax growth is 9 percent behind what it was three years ago.

When I rank Grand Forks against other cities in the state, I find that we continue to be way behind the oil patch towns in many categories; but if you move out of that special situation, Grand Forks comes close to leading the list for growth areas in the state. And now, UND President Robert Kelley and UND just added to that momentum with their outstanding job on enrollment growth.

Following agriculture, it appears the next biggest engine driving economic growth in Grand Forks just added a super charger.

State economic data also continues to be good. That is because of agricultural incomes and energy incomes, especially from oil. Oil prices are off considerably from their high, but the increase in production at record rates in the state more than offsets the decrease in price.

Each month sets a new record in oil production. When September is reported, I am sure we will exceed 10 million barrels -- another first. The number of wells also is likely to set a record; and remember, a well today pumps from 1280 acres. Not so long ago, a well only pumped from 160 acres. That means each well pumps from eight times the area that it used to.

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As oil production increases, so, too, does natural gas and the money that fuel brings into North Dakota. It is true that some of that wealth is owned by people outside of this state, but a lot of it is owned by state residents -- and in any case, North Dakota collects income taxes from those out-of-staters.

The North Dakota Office of Management and Budget does a great job of breaking down the state taxes and spending. I am presenting some of their tables this month so taxpayers can see where the money really comes from and where it really goes. Fact often differs from fiction.

As you review the General Fund revenues and forecast table, it is important to remember, quoting OMB, that "because the $71 million statutory cap for the 2009-11 biennium has been reached, no additional oil tax collections will be deposited in the general fund during the 2009-11 biennium.

"Through August, oil tax collections totaling $345.8 million have been transferred to the permanent oil tax trust fund and are not reflected on this report." Additional oil taxes for the balance of the biennium will be added to the permanent oil tax trust fund.

Reach Kingsbury at (701) 738-4810, or by emailing kae@invisimax.com .

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