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1 Joseph Henchman, North Dakota's Measure 2: How Would Rate Cuts Affect the Peace Garden State's Competitiveness 1 (2008)

handle is hein.taxfoundation/ffbfbxz0001 and id is 1 raw text is: FISCAL


North Dakota's Measure 2: How Would
Rate Cuts Affect the Peace Garden State's
By Joseph Henchman
Executive Summary
This November 4, North Dakota residents will vote on Measure 2, an initiative that lowers
individual income tax rates by 50 percent across-the-board, and corporate income tax rates by
15 percent.
North Dakota has a strong history of restraining taxes with the initiative process. Three
months after the state sales tax was first enacted in 1935, an attempt to repeal it by initiative
narrowly failed 52% to 48%.1 A repeal measure did briefly succeed in 1965, and on several
occasions sales tax increases have been rolled back at the ballot box. In 1978, another
initiative cut the top individual income tax rate from 10% to 7.5%, and since 2004 the top
corporate income tax rate has dropped from 10.5% to 6.5% today.2
Voters must bear in mind interstate and international competition for capital as they consider
Measure 2. According to the Tax Foundation's State Business Tax Climate Index, North
Dakota's tax system is about middle-of-the-pack both nationally and regionally. But when
nearby states offer more inviting tax climates, capital, entrepreneurs and workers are likely to
flow that way. Some anecdotal evidence suggests that this is happening to North Dakota.
Measure 2 could improve North Dakota's ability to keep and attract jobs and investment.
The Tax Foundation takes no position on what the optimal amount of government spending is,
but North Dakota has had several years of strong growth in tax revenues and that suggests that

October 2008
No. 151


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