North Dakota

For filers using North Dakota's regular long form, the five-bracket personal income schedule ranges from 2.67% to 12.0%, with federal taxes paid deductible. The rates for the state's short form (Form 375) are lower: 2.1% (up to taxable income of $27,050) to 5.54% (above $297,350), but without deductions for federal taxes paid. Effective in 2002, the lower rates on the short form replaced a tax of 14% of adjusted federal income tax liability. The corporate income tax schedule has six brackets ranging from 3% (up to $3,000 net income) to 10.5% (above $50,000 net income).Banks have a minimum tax of $50. The state sales and use tax rate is 5%, with exemptions for food and prescription drugs, and lower rates on certain items. Local sales taxes range from none to 2.5%. The state also imposes a full array of excise taxes covering motor fuels, tobacco products, insurance premiums, public utilities, alcoholic beverages, amusements, pari-mutuels, and other selected items. Severance taxes—the oil and gas gross production tax, the coal severance tax, and the oil extraction tax—generate a substantial portion of state revenue. North Dakota's inheritance tax was repealed in 1927 and replaced with an estate tax tied to the exemption for state death taxes in the federal estate tax (enacted in 1926).The federal exemption is scheduled to be phased out by 2007, and with it, North Dakota's estate tax unless countervailing action is taken by the state legislature. North Dakota's revenue losses from the phasing out of its estate tax are estimated at -$1.5 million for 2002/03, -$4 million for 2003/04 and -$5.5 million for 2006/07. Death and gift taxes accounted for 0.5% of state collections in 2002. Other state taxes include various license fees and state property taxes. Most state and local revenues are collected at the state level (64.4% in 2000).

Total state tax collections in North Dakota in 2002 were $1.117 billion (down $57 million from 2001, which, in turn, had been over $850 million below projections), of which 30% was generated by the state general sales and use tax, 25.4% by state excise taxes, 17.8% by personal income taxes, 12.3% by severance taxes, 9.2% license fees, and 4.4% by the corporate income tax. In 2003, combined state and local taxes amounted to 9.8% of income, and North Dakota ranked 17th in the country.

The following table from the US Census Bureau provides a summary of taxes collected by the state in 2002.