State Revenue and the Tax Department

Cory Fong, State Tax Commissioner

The mission of the North Dakota Office of State Tax Commissioner is to fairly and effectively administer the tax laws of North Dakota. In other words, the Tax Department serves as the state’s primary revenue collection agency. For instance, during the 2009-2011 biennium, the State General Fund revenue from all sources was about $3.2 billion, of which the Tax Department collected about 91 percent or $3 billion.

There has been a lot of talk in recent years about North Dakota’s strong revenue collections. This biennium, tax collections are very strong, especially when you consider what’s going on with the national economy. For example, during the first 14 months of the 2011-13 biennium, Sales and Use tax collections increased 89 percent compared to the previous biennium. For Individual Income Tax, that increase is 41 percent; and for Corporate Income Tax the increase is a robust 125 percent.

The strength of our economy is due, in part to oil production. With about 194 rigs drilling, North Dakota is the second largest oil producing state. And our state’s oil production has been getting a lot of attention lately, especially as it relates to the tax revenues generated and the impacts on our state and communities.

Some studies suggest that there are at least 4 billion barrels in recoverable reserves in the Bakken Formation. Other industry studies predict it’s more like 24 billion. Assuming that world oil prices stay moderately high and that the U.S. demand for petroleum products remains strong, our state’s oil activity is likely to remain strong well into the near future.

Every quarter and at year-end, the Tax Department issues a key economic report on taxable sales and purchases, in which we measure 15 industry sectors. The report serves as an economic report rather than a report of actual collections. In the 2011 Annual Report, 14 of 15 industry sectors reported growth and the total taxable sales and purchases was almost $20 billion. This was an increase of $5.5 billion, or 39 percent, over the Annual Report for 2010. And the first and second quarter reports for 2012 were up 52 percent and 41 percent respectively.

There is no doubt that North Dakota has the fastest growing economy in the nation. The 2011 Annual Report identified gains in 162 (80 percent) of North Dakota’s 200 largest cities. Consumer confidence is healthy and cities from West to East are reporting strong gains.

North Dakota has the lowest unemployment rate in the nation – hovering right around 3 percent. Our state’s job creation and growth is outpacing the rest of the nation, increasing 20 percent since 2000. That’s impressive, especially when you consider that nationally job creation has fallen since 2000.

We are seeing wages and personal incomes growing faster than in any other state, placing North Dakota in the top spot, as number one in personal income growth and per capita personal income growth. It doesn’t stop there. The Bureau of Economic Analysis (BEA) ranked North Dakota #1 in Economic Growth in 2011. And, in CNBC’s ranking of Best States for Business – North Dakota jumped eight spots, landing in the Top 5 States for Business. We’ve come a long way!

Besides record tax revenues, North Dakota is experiencing an upturn in our population. Consider, for a moment, that in the 1930’s our peak population was 681,000, and since then we were in a slow but steady population decline. That was until the 2010 Census when we saw an increase of 5 percent – 672,500. And, updates to that 2012 Census (April 2012) now show that we’ve grown another 1.7 percent to 684,000, topping the 1930’s peak!

So, what does all this great news mean for North Dakota? North Dakota is in a period of extraordinary growth right now. And yet, with growth come challenges that put stress on our state’s programs and infrastructure. These are good challenges to have because it means we have more opportunities – more opportunities for business development and entrepreneurs and more opportunities for personal incomes and job creation. It is through these opportunities that North Dakota will succeed, both now and into the future.

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