Herald editorial board
Remember North Dakota's milk-and-honey years of yore? Namely, 2015?
That's when the state again lowered its income tax rate for individuals and corporations, providing more than $100 million in relief for state residents. It was the fourth consecutive legislative session that saw a state income tax reduction.
At the time, it seemed wise. The oil boom was in full swing and providing a sizeable windfall for the state. Everybody knows what happened since, and now the state continues to make cuts to public programs because of shortfalls.
The lens of hindsight shows us it wasn't a good idea.
North Dakota's income tax is 1.10 percent on taxable income less than $37,950 for a single filer and $63,400 for a joint filer. The rate climbs to 2.9 percent on income of more than $416,700.
That low rate has allowed North Dakota to creep into various lists as one of the nation's most tax friendly states. Just one problem: Even with those low rates, North Dakota still doesn't check in at the top of any list because seven states do not have an income tax, including nearby South Dakota and Wyoming.
Since the reductions haven't been enough to overcome the tax-friendly reputation of other states, was it really worth it? Considering the data available in 2015 - and 2009, when the reductions first began - we understand the reasoning, but say it probably wasn't.
The attitude back then was that thanks to oil, North Dakotans of the future could potentially never have to pay income taxes. The oil money, many assumed, would last for generations. Everybody should share in the benefit - a little like Alaska shares its oil revenue with residents.
Of course, that was short-sighted, since North Dakota's previous oil boom also was accompanied by an income-tax reduction before a notable crash in 1981.
Other oil-dependent states - Alaska, Oklahoma and Louisiana - are seeing similar budget troubles because consistent oil revenue doesn't exist.
North Dakota relies too heavily on commodities to make repeated rash tax decisions that could adversely affect future dollars. It's time to learn our own lessons.
Agriculture is big in North Dakota, but has been down in recent years. Oil, too, is big, but fell from $100 per barrel in 2014 to as low as $26 just two years later. It's rebounding, but it could bounce backward again.
State Sen. Ray Holmberg, R-Grand Forks, voted for the tax reduction. He said the $100 million that resulted wouldn't be a savior during today's recession, but that any bit would help. Thursday, we asked him if he still would vote in favor of the tax cut.
"If I knew then what I know now? No," he said.
The state relies too heavily on commodities, so the best tax structure requires conservative tweaks and, especially, diversification. North Dakotans may not like this, but a modest and consistent income tax needs to be part of the equation. Sales taxes, extraction taxes and the like are just too erratic.
In 2015, reducing the income tax again seemed like a good idea.
Today, amid more and deeper state budget cuts, it was the wrong decision.