STORY ARCHIVESSTORY ARCHIVES
VIEW OUR APPSVIEW OUR APPS

North Dakota has the Eighth Highest State and Local Tax Burden in the Nation for FY 2016

May 03, 2018

Print Friendly and PDF


In Fiscal Year (FY) 2016, North Dakota collected $5 billion in state and local taxes—or $6,599 for evey man, woman, and child. While this is an impressive sum of money, it tells us little about whether or not the average North Dakota taxpayer can afford this level of taxation?

 

To better answer this question, this analysis will calculate North Dakota’s tax burden relative to the private sector. Ultimately, it is the private sector that creates new wealth and income. A high tax burden means a state is hobbling its private sector relative to other states and reducing their long-run economic growth potential.

 

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

Unfortunately for taxpayers, as shown in Chart 1, North Dakota’s state and local tax burden (tax collections divided by private sector personal income) was the eighth highest in the nation for FY 2016 at 16.2 percent—or 13 percent above the national average of 14.3 percent.

 

Chart 1 North Dakota State and Local Tax Burden FY 2016.jpg

 

#NorthDakota state and local #taxburden in FY 2016 was the 8th highest in the nation at 16.2%— 13% above US average of 14.3% http://bit.ly/2FX9C8F @keypolicydata #NDpol #NDsen #PolicyData (click to tweet)

 

As shown in Chart 2, North Dakota’s tax burden has increased over time by 58 percent to 16.2 percent in FY 2016 from 10.2 percent in FY 1950. Note, however, that this is down significantly when the tax burden top 20 percent in FY 2013, 2014, and 2015—fueled by the fracking-boom which has since cooled off (more below).

 

Chart 2 North Dakota State and Local Tax Burden by Type of Tax FY 1950 to 2016.JPG

 

#NorthDakota state and local #taxburden has grown 58% between FY 1950 (10.2%) to 2016 (16.2%) http://bit.ly/2FX9C8F @keypolicydata #NDpol #NDsen #PolicyData (click to tweet)

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

 

To put North Dakota’s tax burden into perspective, let’s compare it to size of major industries in the state (as a percent of private sector income). As shown in Chart 3, North Dakota’s 16.2 percent tax burden is greater than these combined industries: wholesale trade (6.9 percent), retail trade (6.7 percent), and utilities (1.6 percent).

 

Chart 3 North Dakota State and Local Tax Burden vs. Major Industry FY 2016.JPG

 

#NorthDakota state and local tax burden > combined industries: wholesale trade, retail trade, and utilities http://bit.ly/2FX9C8F @keypolicydata #NDpol #NDsen #PolicyData (click to tweet)

 

North Dakota’s high tax burden is driven by severance taxes on oil and gas extraction, especially over the last decade with the advent of Hydraulic Fracturing, or fracking, in the Bakken Shale formation. 

 

Within the last decade severance tax collections have grown ten-fold to $2.8 billion in FY 2015 from $262 million in FY 2005.  More impressively, in just seven years, between FY 2009 and 2015, severance tax collections more than tripled to $2.8 billion from $827 million. 

 

Although the oil and gas industry has retrenched with falling oil prices, North Dakota still collected $1.5 billion in severance taxes in FY 2016. Overall, North Dakota’s all other tax burden (which includes severance taxes) moved to the 1st highest (7.2 percent) in the country in FY 2016 from the 5th highest (4.7 percent) in FY 2005.

 

Following in Alaska’s footsteps, in 2010 North Dakota approved a Constitutional Legacy Fund that will put away 30 percent of severance taxes.  The Legacy Fund has already topped 4 billion in assets as of July 1, 2014 and policymakers can’t even touch the money until July 1,2017.  So far it has not been determined what will happen to the Fund once disbursements are allowed—will they simply spend it or return it to the taxpayer?

 

Two options policymakers should definitely consider is reducing other taxes with the Legacy Fund or simply cutting a check to taxpayers.  

 

First, North Dakota is particularly uncompetitive with their sales tax burden of 4.1 percent (14th highest in the country) in FY 2016 and should start there. I’m no fan of the sales tax as much of it is, contrary to popular opinion, a tax on business—see my plan for Rhode Island to eliminate their sales tax.

 

Second, Alaska cuts a check to every man, woman, and child in the state from the Permanent Fund. I have determined that Alaska’s dividend to be the equivalent to a tax reduction. This would be the most direct way for North Dakota to lower its high tax burden ranking.

 

The Tax Foundation shifts the severance tax burden onto other states in their estimates of state and local tax burdens.  In their rankings, North Dakota ranks as only the 33rd highest tax burden in the country at 9 percent.

 

Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in North Dakota—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.

 

The top 20 North Dakota counties with the highest local government tax burden include:

 

  • Sheridan County, ND (13.9 percent)
  • Nelson County, ND (8.3 percent)
  • Benson County, ND (8.0 percent)
  • Pembina County, ND (7.9 percent)
  • Renville County, ND (7.6 percent)
  • Griggs County, ND (7.5 percent)
  • Hettinger County, ND (7.2 percent)
  • Logan County, ND (7.2 percent)
  • LaMoure County, ND (7.1 percent)
  • Towner County, ND (7.1 percent)
  • Richland County, ND (7.0 percent)
  • Emmons County, ND (6.9 percent)
  • Oliver County, ND (6.8 percent)
  • Grant County, ND (6.4 percent)
  • Steele County, ND (6.4 percent)
  • Wells County, ND (5.7 percent)
  • Grand Forks County, ND (5.7 percent)
  • Barnes County, ND (5.6 percent)
  • Golden Valley County, ND (5.6 percent)
  • McIntosh County, ND (5.6 percent)

 

The bottom 10 North Dakota counties with the lowest local government tax burden include:

 

  • Cavalier County, ND (4.8 percent)
  • Divide County, ND (4.6 percent)
  • Bottineau County, ND (4.5 percent)
  • Bowman County, ND (4.5 percent)
  • McLean County, ND (4.4 percent)
  • Cass County, ND (4.3 percent)
  • McHenry County, ND (4.2 percent)
  • Foster County, ND (4.1 percent)
  • Ward County, ND (3.9 percent)
  • Morton County, ND (3.8 percent)
  • Billings County, ND (3.5 percent)
  • Burleigh County, ND (3.4 percent)
  • Slope County, ND (3.3 percent)
  • Mercer County, ND (3.0 percent)
  • Mountrail County, ND (2.9 percent)
  • Williams County, ND (2.8 percent)
  • Stark County, ND (2.0 percent)
  • Dunn County, ND (1.8 percent)
  • McKenzie County, ND (1.4 percent)
  • Sioux County, ND (-16.2 percent, see note)

 

Chart 4 North Dakota Local Tax Burden by County FY 2016.JPG

 

Tribal governments are classified as local governments. As a result, counties with significant tribal activities can result in low or negative private sector income since the private sector is defined as personal income minus government employment and government transfers (Social Security, Medicaid, Welfare, etc.). In this case, Sioux County, ND lies entirely within the Sioux Rock Indian Reservation.

 

Click here to view tax burden data by state, type of tax, and for years 1950 to 2016

 

Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 66 years! See if your state has been above or below the national average?

 

 

 



Category: Tax Burdens

J. Scott Moody

Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.


blog comments powered by Disqus

Stay Up-To-Date on Your State's Key Policy Data - Economics, Politics, Demographics - by Joining Our Mailing List Today!

Check Out Our Unique Apps:

U.S. Capitol.jpg

Government Workforce

Tax Squeeze.jpg

Tax Burden

Strings Attached to Federal Dollars.jpg

Federal Tax and Spend

Hundred Dollar Bill.jpg

Cost of Living (COLI)

Baby.JPG

Demographic

Measuring a Dollar.jpg

Federal Tax & COLI

Retired.jpg

Federal Pension

United States Office of Personnel Management Seal.jpg

Federal Payroll

Check out more

Stories from our

Media Partner: 

Watchdog.org

Check Out All Posts For Your State:

Alabama.jpg  Alabama

Alaska.jpg  Alaska   

Arizona.jpg   Arizona 

Arkansas.jpg  Arkansas

California.jpg  California

Colorado.jpg  Colorado

Connecticut.jpg  Connecticut

 Delaware.jpg  Delaware

Florida.jpg  Florida

 Georgia.jpg  Georgia

Hawaii.jpg  Hawaii

  Idaho.jpg  Idaho

   Illinois.jpg  Illinois

   Indiana.jpg  Indiana

  Iowa.jpg  Iowa

  Kansas.jpg  Kansas

  Kentucky.jpg  Kentucky

   Louisiana.jpg  Louisiana

   Maine.jpg  Maine

  Maryland.jpg  Maryland

Massachusetts.jpg  Massachusetts

Michigan.jpg  Michigan

Minnesota.jpg  Minnesota

  Mississippi.jpg  Mississippi

Missouri.jpg  Missouri

Montana.jpg  Montana

Nebraska.jpg  Nebraska

Nevada.jpg  Nevada

New Hampshire.jpg  New Hampshire

New Jersey.jpg  New Jersey

New Mexico.jpg  New Mexico

New York.jpg  New York

North Carolina.jpg  North Carolina

North Dakota.jpg  North Dakota

Ohio.jpg  Ohio

Oklahoma.jpg  Oklahoma

Oregon.jpg  Oregon

Pennsylvania.jpg  Pennsylvania

Rhode Island.jpg  Rhode Island

South Carolina.jpg  South Carolina

South Dakota.jpg  South Dakota

Tennessee.jpg  Tennessee

Texas.jpg  Texas

Utah.jpg  Utah

Vermont.jpg  Vermont

Virginia.jpg  Virginia

Washington.jpg  Washington

West Virginia.jpg  West Virginia

Wisconsin.jpg  Wisconsin

Wyoming.jpg  Wyoming