North Dakota Gov. Doug Burgum 

(The Center Square) – An analyst with the Institute of Policy and Business Analytics at the University of North Dakota said a tax relief plan introduced by Gov. Doug Burgum seems to work.

Burgum recently announced a tax relief plan that would replace the state income tax with a lower flat tax.

The Relief for All tax plan is projected to save North Dakota taxpayers about $250 million each year and eliminate the individual income tax for 60% of residents. Those with higher incomes would pay a flat tax of 1.5%, resulting in a reduction from 26-48% in their state income taxes, compared to the current income tax rates.

“Now is the right time to provide meaningful, permanent tax relief to make our state a more attractive place to work and a more affordable place to live,” Burgum said. “Under this proposal, almost 60% of taxpayers won’t have to pay state  income tax, and those who do will see their income tax liability reduced  by roughly one-quarter to one-half, allowing North Dakotans to keep  more of their hard-earned money to offset expenses and invest in their families and communities.”

Dr. David Flynn, research director for the institute, told The Center Square that in terms of looking for a method of delivering tax relief to residents that would not create massive shortfalls, the plan could work.

One reason the state can afford this is because of the current oil and gas tax revenue.

"Certainly there is a degree of risk with a commodity basis to revenue generation and that risk is endogenous to the state economy overall," Flynn said. "I think the question of a shortfall will be something addressed as they present the proposal to the legislature. As mentioned above, though, it seems like this potentially minimizes expected shortfalls going forward. How it allows government programs to proceed will also be a question."

State Tax Commissioner Brian Kroshus said that all income earners will see relief, "reaching the most people while providing the highest percentage tax reduction for new families, lower-income filers and those just entering the workforce, including college graduates.”

As it stands right now, Flynn said, it seems there will be benefits shared across all income levels. He said more information would be needed to determine the distribution of the gains. He said the plan potentially changes certain incentives in the workforce and the result might change the benefits.