In the April 17 edition of Forbes, contributor Josh Barro cited an astonishing jump in North Dakota tax collections in 2011 due to the recent oil and gas boom in the northern plains state. Citing U.S. Census Bureau report on 2011 state tax collections figures, Barro said tax collections in North Dakota have soared — up 44.4 percent over 2010, all on the strength of the oil and gas boom in the Bakken shale formation. Severance taxes (taxes on natural resource extraction) leaped 65 percent from year to year and now make up 49 percent of the state’s tax collections. Other taxes were strong, too — the boom in oil-related activity has led to big increases in income and sales tax collections, he said.
“Put another way, the year-to-year increase in severance tax collections ($745 million) is equal to 172 percent of the state’s total 2011 individual income tax collections ($433 million). It sure looks like North Dakota doesn’t need an income tax anymore,” Barro elaborated.
The windfall in public revenue bodes well for a new proposal to abolish property taxes in North Dakota.
“In the last 50 years, only one U.S. state has abolished a major tax (general sales, income, or property). It’s Alaska, which abandoned its income tax after oil started flowing down from the North Slope through the Alaska pipeline. Alaska is now so flush that it has no income or sales tax and it sends an annual oil rebate payment to all of its residents,” according to Barro.
North Dakota could be next, he said.
In June, North Dakota voters will vote on a constitutional amendment proposal to abolish property taxes in the state. Barro said this would be an odd move; if passed, North Dakota would become the only state without property tax. (Seven states have no personal income tax and five have no sales tax.)
“If the property tax proposal doesn’t pass, look for the state to abolish its income tax — or, if the Bakken is productive enough, perhaps it can get rid of both,” he added.