North Dakota Prepares for Potential Tax Hike as Bush Tax Cuts Expire

Strategic Insights -

Tax Commissioner Cory Fong and state legislators are working on legislation to protect North Dakota taxpayers from potential state income tax increases resulting from the expiration of the Bush tax cuts. The standard deduction provision for married filers, which eliminates some of the penalty associated with filing a joint return, is set to expire unless Congress takes action to extend it. If it expires, more than 83,000 North Dakota taxpayers would see an increase in their federal taxable income, and subsequently, their federal and state income taxes. The group anticipates introducing legislation at the beginning of the 2011 legislative session to safeguard the state's taxpayers.

Key Takeaways:

  • The standard deduction provision for married filers, which eliminates some of the penalty associated with filing a joint return, is set to expire unless Congress takes action to extend it.
  • If the provision expires, more than 83,000 North Dakota taxpayers would see an increase in their federal taxable income, and subsequently, their federal and state income taxes.
  • The result would be an increase in state income tax liabilities for married couples filing joint returns, with a maximum increase of up to $94 per year.
  • The overall fiscal impact to the state would be an increase of approximately $6.7 million per biennium in additional tax revenue.
  • Legislation to protect North Dakota taxpayers from potential state income tax increases is expected to be introduced at the beginning of the 2011 legislative session.
  • The legislation aims to ensure that North Dakota taxpayers are not subject to additional state income taxes resulting from Congressional actions.
  • Other possible legislative changes may be necessary to ensure that North Dakota taxpayers do not see increases in their state income taxes resulting from Congressional actions.

Statistics:

  • 83,000: The number of North Dakota taxpayers who would see an increase in their federal taxable income if the standard deduction provision for married filers expires.
  • $94: The maximum increase in state income tax liability for married couples filing joint returns if the standard deduction provision expires.
  • $6.7 million: The estimated increase in additional tax revenue per biennium to the state if the standard deduction provision expires.
  • 2011: The year in which the legislation is expected to be introduced at the beginning of the legislative session.

Sources:

  • Office of the North Dakota State Tax Commissioner
  • Representative Mike Nathe of Bismarck
  • Senator Dwight Cook of Mandan
  • Representative Wes Belter of Cass County, Chairmen of the Senate and House Finance and Taxation Committees