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March 8, 2023

Growing business, not government

Topic: Issues

Last week, Straight Talk podcast host Emmery Mehlhoff visited with Representative Craig Headland about tax legislation and how he’s working to help North Dakota's citizens grow their homes and businesses, not grow government. Here’s an excerpt from the podcast. (Edited for clarity.)

Host Emmery Mehlhoff: Welcome to Straight Talk with NDFB! I have Representative Craig Headland from District 29 and Chairman of the House Finance and Taxation Committee with me today. Can you tell us about how long you've been in the House and how you came to be Chairman?

Rep. Headland: I was first elected in 2003. I served that session and I ended up on the Finance and Tax Committee. It wasn't my first choice by any means, but I enjoyed it so much that I'm still there. I haven't moved. I've spent my entire legislative career in the Finance and Tax committee.

Emmery: Before we talk about your legislation, I want to ask “What is the purpose of taxation?” Most people don't like taxes and there's the saying, “taxation is theft.” But North Dakota’s government obviously has financial responsibilities. Why do we have to have taxes?

Rep. Headland: Well, first of all, if you believe that you need some type of government to offer individuals protection and things like infrastructure, things we need every day in our daily lives that we probably individually can't provide for ourselves, there needs to be some form of government. And in order for the government to operate, it needs to have some revenue. That's where taxation comes into play. And I agree, nobody likes taxation. But it is one of those necessary evils that we need as a government to provide the services that are demanded and requested by individual citizens.

Emmery: How do we determine as a state which taxes are good and which are bad? What is the fair way to tax people?

Rep. Headland: It's probably a matter of individual opinion, but Republicans tend to believe that a general taxation that applies to everybody is probably better. Democrats traditionally have believed the more you receive in wealth, the more you should pay. So, a little different philosophical beliefs there, but that's kind of the way it's always been.

Republicans probably would favor things like sales taxes over income taxes, since income taxes tend to penalize wealth and achievements. As a Republican, I believe that income tax is probably the worst tax that we have as a state government. I've been trying to whittle the rates down my whole legislative career. Eventually I'd like to get to a zero rate where nobody has any individual income tax obligation.

Emmery: If you think about the difficulty in finding people to work, it’s interesting to think about the fact that income tax is really penalizing those who are willing to work.

Rep. Headland: It is. Again, that's why I favor getting the rate down to zero. It does penalize work and achievement. In a state that is so in need of a workforce, I believe it's going to help us attract individuals to move to our state to come and help us with our workforce challenges.

Emmery: You said every session you’ve had a bill to whittle down the income tax. Tell us about the bill that you have this session addressing income tax.

Rep. Headland: I've sponsored House Bill 1158 that has passed the House 79 - 14. The bill modernizes our income tax by going from five marginal rates to essentially one rate. It would actually have a zero bracket and then a 1.5% bracket. It's not a true flat tax, but when the first bracket is at a zero rate, we tend to call it a flat tax.

Emmery: We currently have five income tax brackets?

Rep. Headland: Our current brackets range from 1.1% to 2.9% and there are five brackets. It's unnecessary to have that many brackets and such a narrow tax range. We believe in modernizing our tax and going to a flat tax. We have a pretty significant surplus going into this session, general fund revenues have been running about 24% higher than projections. That's a significant over-taxation and we’ve achieved that by growing the economy.

North Dakota's economy is really growing and it's only being held back because of our lack of workforce. We could be growing even faster than we are. In times of excess, I believe giving back to the taxpayer is proper and necessary and it prevents us from growing government.

I think it's a win-win all around. It's a win for those who have chosen to live and work in North Dakota. And it's also going to be a win in trying to fill some of those unfilled jobs that are so necessary to keep our economy growing.

Emmery: How much money are we talking about here?

Rep. Headland: With what the current income tax is generating, I think it's going to be about $1.1 billion over the biennium. This would be a significant reduction in income tax collections.

Emmery: North Dakota’s rate, like you had mentioned, is already so small in comparison with many other states, like our neighbor, Minnesota. Some of that income tax reduction initially might seem small, but when you think about the significance of a billion dollars in the pockets of North Dakotans to use to do something with, to grow the economy and put it to work. That money will grow businesses and homes in North Dakota and not grow government. And that's awesome.

Rep. Headland: That's correct, Emmery. When we allow the citizens, the taxpayers, to keep that amount of money, the money is going to eventually run through our economy and it's going to generate sales taxes.

Emmery: It really gives the earner the opportunity to choose where they put it.

Thank you again for the work that you're doing as a chairman and as a farmer representing your industry in the Legislature. You have been influential in a lot of different bills this session to benefit production agriculture and our farmers and ranchers out there.

Rep. Headland: Thank you, Emmery. I appreciate Farm Bureau and what they do and what they provide, their membership, and always happy to work with Pete and those of you who are at the Capitol. We want to provide the best for the citizens, your membership, and that's what we work to achieve.

Listen to the entire podcast here:

 

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