BISMARCK, N.D. (AP) — North Dakota’s Republican-led Senate on Wednesday killed a proposal by top GOP House members to tap some earnings from the state’s voter-approved oil tax savings account to help offset income taxes.
Senators defeated the bill 41-4 after it had passed the House by a wide margin. GOP Gov. Doug Burgum also has criticized the bill, saying it wasn’t “good policy.”
The measure would use half of the earnings from the state’s Legacy Fund beginning in 2021 to reduce individual and corporate income taxes. The bill would only use any earnings in excess of $300 million in the next two-year budget cycle.
GOP Rep. Craig Headland, the bill’s primary sponsor and chairman of the House Finance and Taxation Committee, said state income taxes likely would be eliminated over the next decade with Legacy Fund earnings.
He’s argued that the income tax relief would make North Dakota more competitive with other states that don’t have an income tax, including major oil-producing states such as Texas and Alaska.
Headland also believes the bill could help repel potential citizen-initiated measures to drain the fund that currently holds about $6 billion. If that were to happen now, it would mean about $9,000 in cash to each North Dakota resident.
Headland has said the measure also could help could bridle some future pet projects pushed by the governor and fellow lawmakers.
House Majority Leader Chet Pollert and House Appropriations Chairman Jeff Delzer are among the measure’s co-sponsors.
The Greater North Dakota Chamber, the state’s largest business organization, supported the legislation, as has the North Dakota Watchdog Network, which keeps tabs on how public money is spent.
The North Dakota Tax Department says the tax liability for residents is about $900 a year. The state collects about $900 million every two years in income tax, with corporations accounting for only $100 million of the sum.
Beulah GOP Sen. Jessica Unruh, who carried the bill on the Senate floor, said North Dakota already has low-income taxes and the state should keep its “three-legged stool” of sales, property and income taxes to support the state’s treasury.
“What having an income tax does is allows for everyone to have just a little bit of skin in the game when it comes to government and government-funded services,” Unruh told fellow senators.
Voters endorsed a constitutional amendment in 2010 that requires setting aside 30 percent of state tax revenues on oil and natural gas production in the Legacy Fund. The amendment barred the Legislature from spending any of the fund’s assets until June 2017. Currently, a two-thirds vote of the North Dakota House and Senate is needed to spend any of the fund’s principal. Lawmakers may not withdraw more than 15 percent of the principal every two years.
Lawmakers are reviewing several proposals to spend the interest this session, including a plan by Burgum to use $300 million for education loans and grants, and projects that include a $50 million Theodore Roosevelt Presidential Library in western North Dakota.