McFeely: ND could reduce pain by doing something crazy, like raising taxes
FARGO--The pain is real across North Dakota, from college campuses to snowplow operators and maybe even to old folks lying in nursing home beds. The state is short of money, and so in a bit of irony the governor and the Legislature are using a ma...
FARGO-The pain is real across North Dakota, from college campuses to snowplow operators and maybe even to old folks lying in nursing home beds. The state is short of money, and so in a bit of irony the governor and the Legislature are using a machete for a tourniquet.
Who could've imagined this when just four short years ago Rep. Al Carlson, House majority leader and Chief Shoe Polisher for the Oil Boys, defended an attempt to cut oil extraction taxes with this question: "How much more do you need than $5 billion a year in oil revenue?"
Carlson's point, made to talk-show host Joel Heitkamp, was that North Dakota was making plenty of money off the oil companies-almost too much, an embarrassment of riches-and so why not ease the burden for good ol' Harold Hamm and his buddies by cutting their taxes? Carlson said the oil companies were going to vamoose out of the state if he didn't put more money in their pockets.
They did bolt eventually, but it had nothing to do with tax rates. When the price of oil plummeted, Big Oil dropped North Dakota like a bad habit. The oil companies didn't so much love the state as much as they loved taking money out of the state. As a businessman of high moral standards once said, "It's not personal. It's strictly business."
Right now, North Dakota could use every dime possible. State revenue is down, in large part because because the oil and agriculture economies are in the tank. Higher education is looking at 20 percent cuts-one-fifth of their budget!-and Gov. Doug Burgum proposed taxing some nursing home residents to help pay for services.
From cavalierly trying to give money to out-of-state oil companies to trying to slap a tax on senior citizens lying in nursing homes. How the mighty have fallen.
North Dakota's leaders are trying to pass this off as having to make tough decisions in tough times, but the fact is some of the pain is self-inflicted. And it's fairly obvious there are idealogues in Bismarck enjoying this contraction of government, which makes the next sentence in this column as hilarious to write as it probably is to read:
If North Dakota wants to lessen its budget pain, it could raise taxes.
We assume by now you've stopped laughing and cleaned up the coffee you spit out your nose after reading that last sentence. We'll continue.
North Dakota could raise its individual and corporate income taxes fractionally, or even to rates paid just a couple of years ago if it wanted to be bold, and administer a small bandage to the budget bloodletting.
This is an impossibility, we know. It will not be so much as whispered in Bismarck, much less come close to being implemented, but there's more than one way to make budget. You can cut, for sure. You can also raise revenue.
Often forgotten in the doom-and-gloom talk about North Dakota's budget outlook is that the Legislature, in the waning days of the oil boom in 2015, slashed individual and corporate income taxes. It ended a long string of sessions that included income-tax cuts. Nobody was particularly clamoring for income-tax relief in '15-North Dakotans are rightly much more concerned about property taxes-but Carlson led the charge to lower income taxes. He also promised lawmakers would take of property taxes in due time. It's apparently not due time yet.
There was a price to pay, literally, for the income-tax cuts. It's all right there in the 2016 Red Book, the bible of North Dakota taxes published by the tax commissioner's office. It's available online on the tax commissioner's website.
Collections from individual income tax, calculated from July 1, 2015, to June 30, 2017, are projected to be down nearly $360 million from the previous biennium. Corporate income tax collections are projected to be off nearly $270 million. Even taking into account the drop in incomes because of lower oil and ag prices, the tax cut was costly. The fiscal note attached to the 2015 tax cuts, the cost to the state, was estimated at $108 million for the biennium.
Income tax collections are down 43 percent from their peak in 2013. Corporate income tax collections have dipped 60 percent from their peak in 2014. It's not all a sluggish economy. The cuts contributed.
There was one voice of reason from the majority side of the aisle in 2015. Sen. Ray Holmberg, a Republican from Grand Forks, suggested the state "take a break" from doling out tax cuts and instead cover some budget gaps. He was ignored.
Now the state is nickel-and-diming with "fees" and "assessments," and moving money from one pile to another to plug holes. The state's colleges and universities might lose 500 employees before all is said and done. And yet there can be no discussion of raising taxes (and the Legislature won't allow tuition hikes to lessen the blow to campuses).
It's almost as if government is being starved to prove a point. Problem is, the point is sharp and brings pain.