Credit Dennis Hanson for vocalizing his concerns about North Dakota’s income tax.
Hanson was among the sources for a recent Herald report about state income taxes, the Legacy Fund and the relationship those two resources have with the state’s future.
To review: Hanson is 82 and retired. He notices the impact that income taxes have on his Social Security check. The Herald got his name after Hanson called to engage in a lucid and polite debate after the Herald opined in February that no Legacy Fund dollars should be used to ease income taxes in the state.
His opinion should be heard, and we appreciate that he gave it. He hasn’t quite changed our mind about the Legacy Fund, but we know that many agree with him. Too, Hanson has helped further the conversation and dialogue about the Legacy Fund, and that’s a good thing.
However, with deference to Hanson and those who agree with him, our opinion stands: The state income tax should remain in place and no Legacy Funds should ever be used to ease income-tax burden on North Dakota residents.
We said that in February, and recent developments in Alaska have strengthened our argument.
In Alaska, each resident receives an annual check from the Alaska Permanent Fund, a savings account that utilizes revenues gained from oil extraction in the state. The annual check to residents sometimes is as high as $2,000. Alaska does not have an income tax, nor does it have a sales tax.
That approach can be troublesome to states whose economy depends chiefly on commodity markets. Alaska leaders have refused to consider adding revenue through new sources; proposals to introduce income or sales taxes have not gained support.
As the oil industry has declined in recent years, revenue shortfalls have piled up. It has prompted Gov. Mike Dunleavy to slash $444 million from the state’s $8 billion budget. The cuts to higher education likely will be about 40%, and the cuts overall are expected to worsen – not improve – the state’s circumstances.
For example, consider these dire predictions, listed in a piece earlier this week in U.S. News and World Report: University students leaving en masse, elderly residents moving out of the state and domestic violence victims being left without shelter options.
And numerous analysts and news reports point to Alaska’s lack of economic and fiscal diversity as the problem.
Here in North Dakota, we have the Legacy Fund – now growing past $6 billion. We have sales taxes. We have income taxes that help pay for services, but yet still are among the lowest in the nation, at an average of just $866 per resident.
North Dakota and Alaska are so similar. Both have roughly 750,000 residents and both rely heavily on oil dollars to pay many of the bills.
But as Alaska’s financial stool features a single stilt upon which the state precariously balances, North Dakota’s stool has multiple legs (oil, income and sales taxes) and provides a bit of sturdiness to the residents who live here.
Alaska’s problems are a bellwether for North Dakota. It would be wise to heed the message.