News Releases for April 2003
April 16, 2003
For further information, please Contact the Governor's Office
Hoeven Signs Bill To Simplify Corporate Tax
Smart Growth Legislation Will Improve State's Business Climate
BISMARCK, N.D. - Gov. John Hoeven today signed House Bill 1471, which effectively changes the state’s corporate income tax rates. The new law, one of the Governor’s Smart Growth initiatives, decouples the state income tax from the federal income tax to more accurately reflect North Dakota’s favorable business tax climate. Over the past 12 years, no fewer than seven studies and pieces of legislation have been drafted to revise the corporate tax, but none have succeeded until the passage of HB1471. Hoeven was joined by bill sponsors Reps. Al Carlson and Mike Timm, and Sen. Rich Wardner.
At the same time, several recent economic reports indicate that the state’s economic development efforts, such as decoupling the corporate income tax, are making progress and helping to produce economic growth, despite a national recession.
Currently, North Dakota’s combined corporate tax rate is 10.5 percent and allows a federal tax deduction. The actual state tax, however, is closer to 7 percent after federal taxes are deducted. HB 1471 “decouples” the state and federal tax. Decoupling the tax is important because a state’s corporate income tax rate is a significant consideration when businesses select a new site. As many as 15 economic development Internet sites and other business resources currently list North Dakota’s corporate rate at 10.5 percent.
“The real objective here is to attract new businesses and high paying jobs to our state,” Hoeven said. “This new law makes clear to any prospective business that North Dakota is squarely among the most competitive states in the country regarding taxes. Until now, we’ve been perceived as a high tax state because it wasn’t always clear that the federal tax was deductible in our state rate. This bill brings the perception into line with the reality: North Dakota has a very favorable business climate.”
Tax Commissioner Rick Clayburgh said, “I commend the Legislature for passing a bill to repeal the corporate federal tax deduction and lower the corporate income tax rates. North Dakota has taken a step toward removing perceived roadblocks in business location and expansion decisions.”
Lee Peterson, Director of the North Dakota Commerce Department, said, “The enactment of HB 1471 will improve North Dakota’s chance of making it onto the “short list” of states with favorable business tax climates when site selectors begin their review.”
According to Hoeven, Eide Bailly, an independent financial consulting firm, recently ranked Bismarck first among 11 communities across the nation for its favorable tax climate in agriculture and manufacturing. The city ranked ahead of communities like Sioux Falls, S.D.; Richmond, Va.; Chicago, Ill.; Greeley, Colo.; and San Jose, Calif. in the cost of doing business: real estate tax, unemployment insurance, sales and use tax, income tax, and workers’ compensation insurance.
“We’ve completely changed our approach to economic development over the past two years, and we are marketing the state more aggressively,” Hoeven said. “This is just one more example.”
These – and a range of other economic development initiatives – are moving North Dakota forward, Hoeven said. Personal income is growing and the state is closing the gap with the national average, he said.
Hoeven cited U.S. Department of Housing and Urban Development (HUD) numbers showing that the growth of North Dakota’s median family income is outpacing the national rate. At the same time, Creighton University’s Mid-America Business Conditions Survey showed a significant increase in North Dakota’s pace of growth for the seventh consecutive month. This news was followed by a U.S. Bureau of Economic Analysis report on income growth for the third quarter of 2002 showing that North Dakota’s growth rate in personal income is outpacing the nation in the manufacturing sector.
“Taken together, these indicators point to solid, steady economic growth in North Dakota,” Hoeven said. “The numbers are important for two reasons: first, they show that our programs to promote economic growth and higher wages are working, and second that we can afford to fund our most important priorities, like education and healthcare for seniors. Now, more than ever, we need to build our economic momentum by continuing to invest in the things that promote growth and quality of life for our state and our people.”
Recently, HUD released its fiscal year 2003 median family income figures showing an increase of $5,200 to $51,800. The national average increased only $2,100 last year to $56,000, indicating North Dakota is still behind the national average, but closing the gap.
The Mid-America survey, a monthly measure of economic growth in a nine-state region, shows that North Dakota’s business index rose from 54.1 in February to 60.6 in March -- the highest in the region. Index numbers above 50 indicate a growing economy and numbers below 50 indicate a shrinking economy. In addition to North Dakota, states included in the Mid-America survey are Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, Oklahoma and South Dakota.
At the same time, the most recent quarterly report from the U.S. Bureau of Economic Analysis showed that North Dakotans’ personal income is growing at a rate faster than the national average in manufacturing. The personal income of North Dakota’s production workers continued to trend upward compared to the U.S. average over the past five years, with a pronounced increase since 2000.
“We’ve changed economic development in North Dakota to target the creation of higher paying jobs,” Hoeven said. “These income figures show that it’s working and we are making real progress.”
E-mail comments to the Governor
