Governor Doug Burgum, members of the 69th Legislative Assembly and State Tax Commissioner Brian Kroshus today celebrated the signing of a major tax relief package that will provide a combined $515 million in savings for payers of state individual income tax and local property tax over the next two years.
Burgum signed House Bill 1158 with Rep. Craig Headland, the bill’s prime sponsor, House Majority Leader Mike Lefor, Senate Majority Leader David Hogue, bill sponsors, Kroshus and other bill supporters during a ceremony at the Capitol.
“This landmark bill provides the largest individual income tax relief package in state history and is a huge win for North Dakota taxpayers,” Burgum said. “House Bill 1158 allows workers across all tax brackets to keep more of their hard-earned money while also easing the property tax burden on homeowners and making homeownership more affordable for our senior citizens.”
"We put in a lot of work to come up with real tax relief for the people of North Dakota and I'm very pleased with the final result,” Headland said. “It combines $358 million in income tax relief while also providing $156.7 million in property tax relief. This is in addition to the ongoing $1.5 billion in property tax relief the state provides to local communities. All in, this results in historic tax relief for our citizens."
“We’re proud to be providing the taxpayers of North Dakota the largest tax relief package in the state’s history,” Hogue said. “This package is meaningful relief for working families and homeowners across the state.”
“The package is a significant win for North Dakota taxpayers,” Kroshus said. “The greatest benefit of the plan is that it provides meaningful relief to our state’s lower-income earners and retirees on fixed incomes. Rather than a top-down model, it begins with everyday citizens.”
House Bill 1158 will provide $358 million in individual income tax relief by zeroing out the state’s bottom tax bracket and combining the top four brackets into two brackets with reduced tax rates. The two middle income brackets will be taxed at 1.95%, down from 2.04% or 2.27%, and the top two brackets will be taxed at 2.5%, down from 2.64% or 2.9%.
The changes will result in an estimated $104 million in savings for the zeroed-out bottom bracket, $178 million in savings for the combined middle-income brackets and $76 million in savings for the combined top brackets.
The remaining $157 million in the package will be provided as property tax relief in two ways: $103.2 million will be available to homeowners by allowing them to claim a property tax credit of up to $500 on their primary residence, and $53.5 million will be provided by expanding the eligibility requirements and maximum reduction for the state’s Homestead Property Tax Credit program for homeowners 65 and older.
House Bill 1158 originated last August when Burgum, Kroshus, Headland and other legislators unveiled a major flat-tax income tax relief plan. The bill was introduced by Headland, who chairs the House Finance and Taxation Committee, and co-sponsored by Reps. Glenn Bosch, Cole Conley, Jason Dockter, Jim Grueneich, Jared Hagert and Pat Heinert, and Sens. Scott Meyer, Kristin Roers, Terry Wanzek and Jordan Kannianen, who chairs the Senate tax committee. Burgum noted that tax relief was a priority for both the Legislature and executive branch this session, and while there was much debate over how to provide income and property tax relief, he applauded everyone who came to the table and collaborated on the final relief package.
“While this isn’t the flat tax we originally proposed, North Dakota will still be able to claim the lowest income tax rates in the nation among states that have individual income tax, helping us to recruit and retain workers to address our workforce challenges,” Burgum added. “We’re grateful to our legislative partners whose thoughtful work allows North Dakotans to save more than half a billion dollars over the next two years and moves us further down the path toward becoming a zero income tax state.”
The House approved HB 1158 by a vote of 84-6, and the Senate passed it 45-2. The bill also creates a Legislative Tax Relief Advisory Committee to study tax relief, including income and property tax relief, during the 2023-2025 interim. The study will include analysis of the tax relief in HB 1158 and options to implement a flat rate for individual income tax, with findings to be reported to the 2025 Legislature.
The income tax relief in HB 1158 builds on the $211 million in income tax credits approved by the Legislature and signed by Burgum during the November 2021 special session, which previously was the largest income tax relief package in state history.