- Associated Press - Sunday, November 23, 2014

BISMARCK, N.D. (AP) - With the state treasury flush with billions of dollars in oil money, at least one state lawmaker thinks North Dakotans could better spend the roughly $500 million collected annually from the levy.

When the Legislature reconvenes in January, Rep. Scott Louser said he will introduce a bill that would set the state income tax rate at 0 percent, rather than push for an outright repeal.

“It will put more money back in the pockets of residents,” the Minot Republican said. “A stimulation of the economy is the side effect.”

If successful, North Dakota would be the first state to eliminate its income tax since Alaska did it in 1980 after oil started flowing there. Six other states have no income taxes: South Dakota, Florida, Nevada, Texas, Washington and Wyoming.

North Dakota passed Alaska in 2012 to become the second-leading oil-producing state in the nation behind Texas.

“We are kind of mirroring what Alaska went through,” said Sen. Dwight Cook, chairman of the Senate’s Finance and Taxation Committee.

The Mandan Republican said the idea of eliminating or suspending the state income tax, which has been on the books since 1919, has come up before but hasn’t gone anywhere. He said it’s unclear if the GOP-controlled Legislature “has the political will” to do away with it any time soon, even with the state’s envious financial footing.

North Dakota’s income tax has five brackets, with a top assessment of 3.22 percent.

The Legislature has raised income taxes in lean times, including during the 1980s when oil and crop prices nose-dived and left lawmakers scrambling for revenue.

North Dakota’s general fund is financed mostly by taxes on income, sales and energy. It’s uncertain if the state can operate on “on a three-legged tax stool that has one less leg,” Cook said of the income tax, which provides about 15 percent of the general fund.

“In my mind, tax policy has to have certainty,” he said. “The price of oil will have a lot to do with everything we do this session.”

North Dakota’s financial reserves are pegged at about $2 billion, said Pam Sharp, the state’s budget director. When the current budget cycle ends June 30, the state should have a general fund balance of about $550 million because revenues - largely from oil - have been higher than earlier forecast, she said.

The approximately $500 million that the state collects annually from the state income tax is up from $214 million in 2004, state data show.

Republican state tax commissioner Ryan Rauschenberger said the Legislature has cut income tax rates a combined 38 percent since 2009.

“I’ve always been a supporter of lowering taxes as low as we can,” Rauschenberger said. “But it’s all driven by the budget and if the can the budget handle it.”

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