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Tax policy in North Dakota

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Tax policy in North Dakota
Budget Policy Logo on Ballotpedia.png
Tax rates in 2017
Personal income tax:
1.1% to 2.9%
State sales tax:
5.00%
Corporate income tax:
1.41% to 4.31%
Tax revenues in 2016
Total tax collections:
$3.71 billion
Tax collections per capita:
$4,894
Public Policy Logo-one line.png
Total state expenditures • State debt • North Dakota state budget and finances

North Dakota generates the bulk of its tax revenue by levying a sales tax and other miscellaneous taxes. The state derives its constitutional authority to tax from Article X of the state constitution.[1][2]

Tax policy can vary from state to state. States levy taxes to help fund the variety of services provided by state governments. Tax collections comprise approximately 40 percent of the states' total revenues. The rest comes from non-tax sources, such as intergovernmental aid (e.g., federal funds), lottery revenues and fees. The primary types of taxes levied by state governments include personal income tax, general sales tax, excise (or special sales) taxes and corporate income tax.[3]

HIGHLIGHTS
  • According to the United States Census Bureau, North Dakota collected $3.71 billion in tax revenue in 2016. The state's tax revenue per capita was $4,894.

    • Tax rates

    Personal income tax

    See also: Personal income tax

    North Dakota utilized a personal income tax rate ranging from 1.1 percent to 2.9 percent in 2017. An individual's tax liability varies according to his or her tax bracket. A tax bracket is the income range to which a tax rate applies.[4]

    The table below summarizes personal income tax rates for North Dakota and neighboring states in 2017.[4]

    Personal income tax rates, 2017
    State Tax rates Number of brackets Brackets
    Lowest Highest Lowest Highest
    North Dakota 1.1% 2.9% 5 $37,950 $413,350
    Minnesota 5.35% 9.85% 4 $25,390 $156,911
    Montana 1% 6.9% 7 $2,900 $17,600
    South Dakota No state income tax
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Policy Center, "Individual State Income Tax Rates 2000-2017," accessed October 26, 2017

    Personal exemptions

    States that collect a personal income tax allow individuals to claim personal exemptions on income taxes each year. The personal exemption indicates that only a person's income above a certain level is subject to taxation. [5]

    Exemptions work by reducing the amount of an individual's taxable income. Both state and federal taxes allow exemptions. The state exemptions for North Dakota and its neighboring states as reported by the Tax Policy Center are reported in the chart below.[6]

    Personal exemptions, 2017
    State Single Married Dependents
    North Dakota $4,050 $8,100 $4,050
    Minnesota $4,050 $8,100 $4,050
    Montana $2,400 $4,800 $2,400
    South Dakota No state income tax
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Policy Center, "Individual State Income Tax Rates 2000-2017," accessed October 26, 2017

    Capital gains tax

    See also: Capital gains tax

    A capital gains tax is a tax levied on the profit gleaned from the sale of a capital asset. Examples of capital assets include stocks, businesses, land parcels, homes, personal items and more. Capital gains are taxable at both the federal and state levels. While the federal government taxes capital gains at a lower rate than regular personal income, states usually tax capital gains at the same rates as regular income. [7][8][9]

    The table below summarizes uppermost capital gains tax rates for North Dakota and neighboring states in 2015.

    Uppermost capital gains tax rates by state, 2015
    State State uppermost rate Combined uppermost rate
    North Dakota 3.2% 26.3%
    Minnesota 9.9% 30.9%
    Montana 6.9% 27.9%
    South Dakota 0% 25%
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," accessed October 26, 2017

    Sales tax

    See also: Sales tax

    Almost all states employ a statewide sales tax, which ranges from 2.9 percent in Colorado to 7.25 percent in California. Additionally, many states allow the levying of local sales taxes, which are then added to the state's tax.

    North Dakota's state sales tax was 5.00% percent in 2017. The average local tax was about 1.78% percent, meaning that the average combined sales tax was about 6.78% percent. The table below displays the state tax rates, average local tax rates, and average combined tax rates for North Dakota and its neighboring states.[10]

    Combined sales tax rates, 2015
    State State sales tax Average local sales tax Combined
    North Dakota 5.00% 1.78% 6.78%
    Minnesota 6.88% 0.42% 7.30%
    Montana 0.00% 0.00% 0.00%
    South Dakota 4.50% 1.89% 6.39%
    Note: For full annotations, see the source below.
    Source: The Tax Foundation, "State and local sales tax rates, 2017," accessed October 26, 2017

    The table below summarizes sales tax rates for North Dakota and neighboring states in 2017 as well as the state's policy with respect to types of items commonly exempted from sales tax (i.e., food, prescription drugs and nonprescription drugs).[11]

    Sales tax rates, 2017
    State Sales tax rate Exemption status
    Food Prescription drugs Nonprescription drugs
    North Dakota 5.0% Exempt Exempt Taxable
    Minnesota 6.9% Exempt Exempt Exempt
    Montana 0.0% No state sales tax No state sales tax No state sales tax
    South Dakota 4.5% Taxable Exempt Taxable
    Source: Tax Policy Center, "Sales Tax Rates 2000-2017," accessed October 26, 2017

    Excise taxes

    See also: Excise taxes

    Excise taxes, also known as selective sales or differential commodity taxes, are levied for the sales of specific goods or services. Excise taxes are considered indirect taxes because they are not charged directly to individuals. In most cases, the excise tax is paid by the producer or seller of an item. The cost of the tax is then included in the sale price of the item and passed on to the consumer. The tables below provide excise tax rates for motor fuel, alcohol and cigarettes in North Dakota and neighboring states.[12][13][14][15]

    Fuel excise tax rates, 2017 (in cents per gallon)
    State Gasoline Diesel Gasohol
    Excise tax Other taxes Total tax Excise tax Other taxes Total tax Excise tax Other taxes Total tax
    North Dakota 23¢ 0¢ 23¢ 23¢ 0¢ 23¢ 23¢ 0¢ 23¢
    Minnesota 28.5¢ 0.1¢ 28.6¢ 28.5¢ 0.1¢ 28.6¢ 28.5¢ 0.1¢ 28.6¢
    Montana 27¢ 0¢ 27¢ 27.75¢ 0¢ 27.75¢ 27¢ ¢ 27¢
    South Dakota 28¢ 2¢ 30¢ 28¢ 2¢ 30¢ 26.6¢ 2¢ 28.6¢
    Note: For full annotations, see the source below.
    Source: Tax Policy Center, "State Motor Fuels Tax Rates 2000-2011, 2013-2017," accessed October 26, 2017
    Alcohol excise tax rates, 2017 (in dollars per gallon)
    State Liquor Wine Beer
    Tax rate Does general sales tax apply? Tax rate Does general sales tax apply? Tax rate Does general sales tax apply?
    North Dakota $2.5 -- $0.5 -- $0.2 --
    Minnesota $5.0 -- $0.3 -- $0.1 --
    Montana See footnote 1 N/A $1.0 N/A $0.1 N/A
    South Dakota $3.9 Yes $0.9 Yes $0.3 Yes
    Note: For full annotations, see the source below.
    1"In 17 states, the government directly controls the sales of distilled spirits. Revenue in these states is generated from various taxes, fees, price mark-ups, and net liquor profits."
    2"General sales tax applies to on-premise sales only."
    Source: Tax Policy Center, "Alcohol Rates 2000-2010, 2013-2017," accessed October 26, 2017
    State cigarette taxes, 2017 (in cents per pack)
    State Tax rate National ranking
    North Dakota 44¢ 48
    Minnesota 304¢ 7
    Montana 170¢ 21
    South Dakota 153¢ 26
    Note: For full annotations, see the source below.
    Source: Tax Policy Center, "State Cigarette Taxes, 2017," accessed October 26, 2017

    Corporate income tax

    See also: Corporate income tax

    North Dakota levies a corporate income tax rate of 1.41 to 4.31 percent. The table below compares the corporate income tax rates of some of its neighboring states.[16][17]

    Corporate income tax rates, 2016
    State Tax rate Brackets Number of brackets
    Lowest Highest
    North Dakota 1.41% to 4.31% $25,000 $50,000
    Minnesota 9.80% Flat Rate 1
    Montana 6.75% Flat Rate 1
    South Dakota No corporate income tax
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "State Corporate Income Tax Rates and Brackets for 2015," accessed October 26, 2017

    Property tax

    See also: Property tax

    Most often, property tax applies to real estate, although some states levy property taxes on other types of personal property, such as automobiles. Generally speaking, an individual's property tax liability is determined by the tax rate and the tax base, which is "determined by both the assessed value of the property and ... the share of the assessed value that is subject to tax." To learn more about property taxes, including tabulation methods, see this page. Property tax rates can vary substantially from locality to locality within a state.[18][19][20] [18][19]

    The table below provides the mean amount of property taxes paid in 2012, as well as property tax as a mean percentage of home value for 2014, in North Dakota and neighboring states.[18]

    Mean property taxes paid per state, 2012 and 2014
    State Mean property taxes paid (2012) Property tax as a percent of home value (2014)
    North Dakota $2,530 0.95%
    Minnesota $2,565 1.09%
    Montana $1,932 0.75%
    South Dakota $2,190 1.22%
    Source: Tax Policy Center, "Residential Property Taxes in the United States," November 18, 2013
    Source: Tax Foundation, "Facts & Figures 2016: How Does Your State Compare?", accessed October 27, 2017

    The table below lists per capita state and local property tax collections for North Dakota and neighboring states for fiscal year 2013.[21]

    State and local property tax collections per capita, 2013
    State Collections per capita
    North Dakota $1,140
    Minnesota $1,547
    Montana $1,407
    South Dakota $1,231
    Source: Tax Foundation, "Facts and Figures 2016: How Does Your State Compare?" accessed October 26, 2017

    Estate and inheritance taxes

    See also: Estate and inheritance taxes

    Estate and inheritance taxes are levied on the property of deceased individuals (decedents). Generally speaking, an estate tax is applied to the value of a decedent's property and is paid from the estate before distribution to any heirs. By contrast, an inheritance tax is paid by the heir or heirs of a decedent's assets.[22][23][24]

    North Dakota does not levy an estate tax, although residents are liable for the federal estate tax. The table below summarizes the estate tax rates for North Dakota and neighboring states in 2016.[24]

    Estate taxes, 2016
    State Exemption threshold Minimum rate Maximum rate
    North Dakota N/A
    Minnesota $1,600,000 9.00% 16.00%
    Montana N/A
    South Dakota N/A
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "Facts and Figures 2015: How Does Your State Compare?" accessed October 5, 2015

    Tax revenues

    See also: North Dakota state budget and finances

    The table below breaks down state government tax collections by source in 2016 (comparable figures from surrounding states are also provided to give additional context). Figures for all columns except "2016 population" and "Per capita collections" are rendered in thousands of dollars (for example, $2,448 translates to $2,448,000). Figures in the columns labeled "2016 population" and "Per capita collections" have not been abbreviated.[25]

    State tax collections by source ($ in thousands), 2016
    State Property taxes Sales and gross receipts Licenses Income taxes Other taxes Total 2016 population Per capita collections
    North Dakota $3,910 $1,496,824 $204,055 $454,194 $1,550,122 $3,709,105 757,952 $4,894
    Minnesota $849,824 $10,120,647 $1,426,235 $12,248,267 $544,155 $25,189,128 5,519,952 $4,563
    Montana $278,497 $562,474 $319,020 $1,300,011 $167,941 $2,627,943 1,042,520 $2,521
    South Dakota N/A $1,440,041 $268,227 $32,684 $6,598 $1,747,550 865,454 $2,019
    United States $18,364,298 $442,909,995 $52,164,396 $392,286,910 $24,538,146 $930,263,745 322,762,018 $2,882.20
    Source: U.S. Census Bureau, "2016 annual survey of state government tax collections by category," accessed June 26, 2017

    The table below lists 2016 tax collections by source as percentages of total collections. About 41.8 percent of North Dakota's total state tax collections came from sales taxes and gross receipts.[25]

    State tax collections by source (as percentages), 2016
    State Property taxes Sales and gross receipts Licenses Income taxes Other taxes
    North Dakota 0.1% 40.4% 5.5% 12.2% 41.8%
    Minnesota 3.4% 40.2% 5.7% 48.6% 2.2%
    Montana 10.6% 21.4% 12.1% 49.5% 6.4%
    South Dakota N/A 82.4% 15.3% 1.9% 0.4%
    Source: U.S. Census Bureau, "2016 annual survey of state government tax collections by category," accessed April 4, 2016


    Tax ballot measures

    Voting on taxes
    Taxes.jpg
    Ballot measures
    By state
    By year
    Not on ballot
    See also: Taxes on the ballot and List of North Dakota ballot measures

    Ballotpedia has tracked the following ballot measures relating to taxes in North Dakota.

    1. North Dakota Four Cent Gasoline Tax Initiative (1930)
    2. North Dakota Gasoline Tax Refunds Initiative (1946)
    3. North Dakota Graduated Land Tax Initiative (1942)
    4. North Dakota Graduated Property Tax Initiative, Amendment 2 (1950)
    5. North Dakota Graduated Land Tax, Initiative 1 (1954)
    6. North Dakota Graduated Land Tax Initiative (1940)
    7. North Dakota Gross Income Tax Initiative (1939)
    8. North Dakota Gasoline Motor Fuel Initiative (1940)
    9. North Dakota Income Tax Reductions Initiative, Measure 2 (1978)
    10. North Dakota Water Development and Funding, Measure 4 (1992)
    11. North Dakota Farm Machinery and Electricity Taxes Initiative, Measure 1 (1976)
    12. North Dakota Rural Roads Gas Tax, Initiative 3 (1954)
    13. North Dakota Oil Extraction Tax Initiative, Measure 6 (1980)
    14. North Dakota Uniform Taxation within Classification Initiative (1918)
    15. North Dakota Property Tax Initiative (1924)
    16. North Dakota Reducing Assessed Valuation Initiative (1932)
    17. North Dakota Classification of Taxable Property Initiative (1940)
    18. North Dakota Taxation and Classification of Property Initiative (1942)
    19. North Dakota Personal Property Tax Exemption, Initiative 2 (1964)
    20. North Dakota Personal Property Tax Exemption, Initiative 2 (1965)
    21. North Dakota Food Sales Tax Exemption, Initiative 1 (1954)
    22. North Dakota Temporary Sales Tax Increase, Initiative 3 (1965)
    23. North Dakota Tax Allocation, Initiative 4 (1954)
    24. North Dakota Sales Tax Increase for Education, Measure 4 (1990)
    25. North Dakota Gasoline Tax Initiative (1926)
    26. North Dakota Repeal State Income Tax Laws Initiative (1944)
    27. North Dakota Income Tax Exemptions, Initiative 1 (1950)
    28. North Dakota Food and Drug Sales Tax Exemption, Initiative 2 (1952)
    29. North Dakota Tax Abatement Initiative (1940)
    30. North Dakota Maximum School Taxes Initiative (1934)
    31. North Dakota Diversion of State Highway Construction Funds Initiative (1939)
    32. North Dakota State Corporate and State Income Tax Rates, Initiated Statutory Measure 2 (2008)
    33. North Dakota State Legacy Fund Establishment, Measure 1 (2010)
    34. North Dakota Property Tax Amendment, Measure 2 (June 2012)
    35. North Dakota Permanent Oil Tax Trust Fund, Constitutional Measure 1 (2008)
    36. North Dakota Property Transfer Tax Ban Amendment, Measure 2 (2014)
    37. North Dakota Clean Water, Wildlife and Parks Amendment, Measure 5 (2014)
    38. North Dakota Uniform Taxation Referendum (1914)
    39. North Dakota Repeal Mill Tax for Terminal Elevators (1916)
    40. North Dakota Hail Insurance Initiative (1918)
    41. North Dakota Hail Insurance Referendum (1918)
    42. North Dakota Tax Commissioner Referendum (1919)
    43. North Dakota Compromise Bank Stock Taxes Referendum (1924)
    44. North Dakota Gasoline Tax Referendum (1932)
    45. North Dakota Sales Tax Referendum (1933)
    46. North Dakota Income Tax Referendum (1936)
    47. North Dakota Classification and Exemption of Personal Property from Taxation Referendum (1942)
    48. North Dakota State Equalization Fund Levy Referendum (1944)
    49. North Dakota Levy for Post War Rehabilitation Referendum (1946)
    50. North Dakota Valuation Basis for Computing Tax Referendum (1946)
    51. North Dakota Institutional Buildings Fund Tax Referendum, Amendment 1 (1948)
    52. North Dakota Post War Rehabilitation Referendum (1948)
    53. North Dakota State Medical Center Referendum (1948)
    54. North Dakota Special Gasoline Tax, Referendum 1 (1950)
    55. North Dakota County Tax Levy Limitations, Referendum 8 (1956)
    56. North Dakota One Mill Levy for State College Buildings, Referendum 1 (1958)
    57. North Dakota Aviation Fuel Tax Referendum, Amendment 4 (1960)
    58. North Dakota County Taxes and Poor Relief, Referendum 4 (1962)
    59. North Dakota Graduated Income Tax, Referendum 1 (1963)
    60. North Dakota Adjusted Individual Income Tax, Referendum 2 (1963)
    61. North Dakota Income Tax Withholding, Referendum 3 (1963)
    62. North Dakota Urban Renewal Taxes, Referendum 4 (1963)
    63. North Dakota School District Taxes, Referendum 5 (1963)
    64. North Dakota Dog and Horse Race Gambling, Initiative 4 (1964)
    65. North Dakota Income and Sales Taxes, Referendum 4 (1965)
    66. North Dakota Tax Levying Referendum, Number 1 (1966)
    67. North Dakota Legislative Deadlines and Tax Authority Referendum, Amendment 1 (1978)
    68. North Dakota State Revenue Limitation Referendum, Amendment 3 (1978)
    69. North Dakota State Property Tax Authority Referendum, Amendment 2 (1980)
    70. North Dakota State Medical Center Mill Levy Referendum, Amendment 3 (1980)
    71. North Dakota Taxation of Property Referendum, Amendment 4 (1980)
    72. North Dakota Coal Development Impact Trust Fund Referendum, Amendment 5 (1980)
    73. North Dakota Medical Center Mill Levy Referendum, Measure 1 (1982)
    74. North Dakota Effective Date of Tax Measures Referendum, Measure 1 (1987)
    75. North Dakota Income Tax Increase and Withholding Referendum, Measure 2 (1987)
    76. North Dakota Cable Television Sales Tax Referendum, Measure 4 (1988)
    77. North Dakota Suspension of Tax Measures Referendum, Measure 1 (1988)
    78. North Dakota Federal Land Bank Taxation, Measure 3 (1988)
    79. North Dakota Motor Vehicle Fuel Tax Rate, Measure 3 (1989)
    80. North Dakota Sales and Use Tax Rate, Measure 4 (1989)
    81. North Dakota Income Tax Rate, Measure 7 (1989)
    82. North Dakota Waste Facility Disposal Fees, Measure 7 (1992)
    83. North Dakota Taxable Status of Land Held for Conservation Purposes, Constitutional Measure 1 (2002)
    84. North Dakota Tobacco Tax Increase, Initiated Statutory Measure 4 (2016)
    85. North Dakota Sales Tax Referendum (1935)
    86. North Dakota Volume-Based License Fees for Creameries Referendum (1938)
    87. North Dakota Initiated Measure 4, Prohibit Taxes on Assessed Value of Real Property Initiative (2024)

    Recent news

    The link below is to the most recent stories in a Google news search for the terms North Dakota taxes. These results are automatically generated from Google. Ballotpedia does not curate or endorse these articles.

    Tax policy in North Dakota - Google News

    See also

    External links

    Footnotes

    1. ↑ North Dakota Constitution, "Article X," accessed October 17, 2014
    2. ↑ Tax Policy Center, "State Tax Collection Shares by Type 2000-2013," June 20, 2014
    3. ↑ Brunori, D. (2011). State Tax Policy: A Political Perspective. Washington, D.C.: The Urban Institute Press
    4. ↑ 4.0 4.1 Tax Policy Center, "Individual State Income Tax Rates 2000-2017," accessed October 26, 2017
    5. ↑ Tax Policy Center, "What is the personal exemption?" accessed December 14, 2015
    6. ↑ Internal Revenue Service, "3. Personal Exemptions and Dependents," accessed December 14, 2015
    7. ↑ Internal Revenue Service, "Topic 409 - Capital Gains and Losses," August 19, 2014
    8. ↑ Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," February 11, 2014
    9. ↑ Tax Policy Center, "Capital Gains and Dividends: How are capital gains taxed?" June 22, 2011
    10. ↑ The Tax Foundation, "State and local sales tax rates, 2017," accessed October 26, 2017
    11. ↑ Tax Policy Center, "Sales Tax Rates 2000-2017," accessed October 26, 2017
    12. ↑ Tax Policy Center, "Excise taxes," accessed October 20, 2014
    13. ↑ Investopedia, "Excise Tax," accessed October 20, 2014
    14. ↑ Tax Foundation, "Excise Taxes," accessed October 20, 2014
    15. ↑ Internal Revenue Service, "Excise Tax," accessed October 20, 2014
    16. ↑ Investopedia, "Corporate Tax," accessed September 24, 2014
    17. ↑ Tax Foundation, "State Corporate Income Tax Rates and Brackets for 2015," accessed October 7, 2015
    18. ↑ 18.0 18.1 18.2 Tax Policy Center, "Residential Property Taxes in the United States," November 18, 2013
    19. ↑ 19.0 19.1 Bankrate, "Property taxes explained," February 3, 2000
    20. ↑ Investopedia, "Property Tax," accessed September 26, 2014
    21. ↑ Tax Foundation, "Facts and Figures 2015: How Does Your State Compare?" accessed October 5, 2015
    22. ↑ About.com, "What's the Difference Between an Estate Tax and an Inheritance Tax?" accessed October 16, 2014
    23. ↑ Internal Revenue Service, "Estate Tax," updated September 29, 2014
    24. ↑ 24.0 24.1 Tax Foundation, "Facts and Figures, 2015," accessed October 6, 2015
    25. ↑ 25.0 25.1 U.S. Census Bureau, "2016 annual survey of state government tax collections by category," accessed June 26, 2017
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