North Dakota’s Energy Industry is Boosting State Tax Revenue

According to the state Legislative Budget Office, North Dakota is on track to end its budget cycle with record levels of tax revenue from oil and gas companies operating in the state. Budget officials made clear the Roughrider State is in a decidedly strong fiscal position, due in large part to strong tax revenues and sizable federal funding. Governor Burgum and legislative officials reportedly plan to use some of the excess funding to eliminate the state income tax and replace it with a flat tax.

Taxes on oil production are normally a big money-maker for the state, which have brought in over $21 billion between 2011 and 2021. Those revenues supported $8.2 billion for local communities and infrastructure, nearly $1.6 billion for K-12 education, over $1.2 billion for water and flood control projects, $879 million for local transportation projects, $440 million for property tax relief and $29 million for outdoor heritage projects across the state, according to a study examining the tax revenues and expenditures.

Strong tax revenues from oil producers remains true for the current two-year budget period of 2021 – 2023, and inflows are far exceeding initial estimates. The Office calculates North Dakota has generated $1.1 billion in oil tax revenues through August 2022, or roughly 52 percent more than initially forecasted. 

Revenues from oil production, particularly from the western portion of the state, are crucially important to funding programs. For example, with a projection of $3.7 billion in revenues, the state would allocate $500 million to tribal governments, $1.6 billion to constitutional requirements for school funding and employee pensions, $500 million for counties and school districts, and $1.1 billion for the state general fund for tax relief and regular appropriations.

The abundant tax revenues for North Dakota were made possible due to the large-scale capital investments by oil and gas companies throughout the state. Unlike other states blessed with natural resources, state officials have fully embraced the production of these resources. Energy companies create jobs, pay taxes, and ensure Americans near and far have access to affordable energy. Businesses should continue to invest in the oil and natural gas industry and appreciate the reciprocal investment, as evidenced by the Roughrider State.

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