Over-Taxing What We Earn
The headline of a press release on Monday May 7th read: “State Treasurer Kelly Schmidt announced today that the State Treasury currently has invested a record balance of $745 million.”
I’m not an accountant nor am I smart enough to figure out why the state is bragging about having $745 million in the bank while the state’s balance sheet shows upwards of $1.7 billion in outstanding debt.
As much as some like to paint a rosy picture, the fact is the only thing rosy is the color of the glasses some people see the world through.
The phrase “the greater good” comes up a lot in political and philosophical conversation, but what really defines the greater good?
Case in point: North Dakota has a problem – our citizens lack the income to support the current income tax structure.
According to North Dakota Tax Department statistics, out of 320,000 income tax payers, a mere 14,000 taxpayers in this state make in-excess of $150,000 adjusted gross income (AGI) each year and represents the “richest 4%” pay 32% of the total tax bill. On the flip-side, 40% of “single filers” make less than $29,700 AGI and 37% of “married filers” make less than $49,600 AGI – together these groups pay 43% of the tax bill. The middle class, defined as those who make between $30,000 and $150,000 comprise 19% of taxpayers, pay 23% of the tax bill. Altogether, the state collects in excess of $260 million each year from its citizen’s income.
This tax structure has been described as “progressive” for all these decades, but how progressive can it be when the combined state sales and state income tax burden on every dollar the lowest bracket spends is 7.1% and the burden on every dollar the highest bracket spends is 10.54%? That is a considerable amount of already low incomes being confiscated from citizens of North Dakota.
Robbing Peter to Reduce Paul’s Property Taxes
On their way out the door, legislators finished up the 2007 session by passing a discriminatory tax burden transference bill that was sold as being “tax relief.”
Now that it is law, it is being sold as a “broad-based tax relief.” The law will allow property owners to apply 10% of their property taxes toward their income tax liability. Typically the term “broad-based” is reserved for policies that help everyone, not just a select group of people; also, the term “tax relief” is generally used for policies that result in lower taxes – this plan does not lower taxes, it simply transfers the burden.
The state surplus that was spent this session was created by the sales tax due to increased economic activity in general, the state’s tax windfall from oil extraction, and from by taxing the income of North Dakotans just trying to make ends meet.
Generally accepted estimates indicate that 30% of income earners in the state of North Dakota do not own property. Typically, conservatives like to stay away from creating class warfare situations, however, this plan explicitly leaves out anyone that does not own property or is not a senior citizen. The biggest problem with this policy is that it again sweeps aside young people who are in college or have recently graduated.
Is transferring the tax burden of property ownership to those who do not own property in the greater good of the state of North Dakota?
What does it mean?
Too many will read these numbers and say that the rich aren’t paying their share. The real conclusion is that in an attempt to create an ideological notion of fairness through the tax code, policymakers over the decades have managed to excessively reduce the average North Dakotan’s take home pay via over-taxation.
In this case, the greater good would be to maximize the amount of the income North Dakotans retain by gradually and progressively eliminating the income tax altogether. The state government can do nothing in a direct manner for wages of its people. What the state can do is allow its citizens to keep more of their hard earned money, most of which will be injected into the economy, and taxed, at the point of sale. If the elected representatives of this state do not recognize the need for higher take-home pay soon, the people of North Dakota may just hold their own 21st Century Boston Tea Party to reclaim what is rightly theirs.
So when will it be enough?
At some the citizens of this state will have to demand that the elected officials do something to reign in these tax burdens. Each dollar that is taken from the income of North Dakotans by the state is a dollar that will not be used to develop an economy that can sustain the government. With declining working populations, and increasing retired populations, the burden of government per capita will increase on its own. There is no need to artificially increase that burden by increasing spending by 24% in a single budget cycle.
Hopefully the 2007 session will serve as a reminder and will only be a One-Time Mistake.