Herald editorial board
Certain Republicans in the North Dakota House likely will be popular with the state's voters - at least those voters who aren't deeply thinking about how a modest state income tax is a necessity in a commodity-based economy.
Last week, a state House panel added an amendment to the state budget bill that could eventually kill North Dakota's annual income tax and replace it with dollars from the growing Legacy Fund. This is a proposal widely discussed in North Dakota, but one that was soundly defeated, 41-4, last month by wise members of the Senate.
The proposal would divert half of the Legacy Fund's earnings each two-year cycle into an "income tax rate reduction fund." After a few years, proponents believe the tax rate would be so small that lawmakers could repeal income taxes altogether.
It's not a good move, and our hope is that this proposal - and any like it that would simply hand out Legacy Fund dollars to the general public - is squashed before making any headway whatsoever.
The Legacy Fund was created via statewide vote in 2010 that mandated 30 percent of oil and gas tax revenue be stashed away in a state savings account. Today, the balance nears $6 billion; also today, many residents and lawmakers have ideas for using those dollars.
One popular idea is to follow the Alaska method. In that state, all residents receive an annual check, paid from oil tax revenues.
We subscribe to the philosophy of Gov. Doug Burgum, who urges Legacy Fund dollars be doled only to projects that have regional, state or national impact; that the dollars be multiplied through partnerships or matching funds; that Legacy projects diversify the economy and attract workforce; and that projects have lasting impacts beyond our current generation.
Using these criteria, we don't see tax relief as a legitimate use of Legacy dollars. Proponents of the income-tax proposal say it would help attract workforce, but even that isn't a certainty.
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.
It's a low, low tax rate - proven by North Dakota's presence on various lists for tax-friendly states. If that low tax rate won't help North Dakota attract more workers, we're not sure even zero income tax would move the needle in the appropriate direction.
And then there's North Dakota's economy - heavily reliant on oil and agriculture. In boom years, the economy thrives; in down years, the economy suffers. Those down years will be exacerbated if the income tax goes away.
Really, North Dakotans have learned this lesson already, since the income tax has been reduced in the past and some lawmakers have openly said it was a mistake as commodity prices roller-coaster upward and downward.
Using Legacy Fund dollars for income-tax relief would be a popular political move for lawmakers. Residents would love the extra dollars in their pockets.
Yet it would be a great mistake.