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Senate deletes state income tax rebates

BISMARCK -- The proposed North Dakota $100 million state income tax rebate for this year is gone. At least, as far as the state Senate is concerned.

But senators still favor a state income tax reduction, much as Gov. John Hoeven and several other lawmakers have proposed this session.

The Senate adopted amendments to House Bill 1324 on Thursday that had been proposed by the Senate Finance and Tax Committee, then sent the bill to its Appropriation Committee for further consideration.

HB 1324's new version has a $114 million cost to the state general fund during the 2009-11 biennium, coming in the form of lower tax rates that will take effect Jan. 1, 2010.

HB 1324's prime sponsor Rep. Rick Berg, R-Fargo, introduced it in January as a state stimulus payment bill that would send $100 million of the state's surplus out to taxpayers this year in the form of lump sum rebates. It then also would have lowered individual income tax rates starting Jan. 1, 2011.

Berg said Thursday after learning of the amendments that "any tax relief, for our current economy, is good.

But he was disappointed that the Senate version would "put cash in the hands of people" right away.

Under current law, the state tax rates, depending on income, are 2.1, 3.92, 4.34, 5.04 and 5.54 percent.

Under the version of HB 1324 the House passed in February, the rates would have been 1.81, 3.38, 3.75, 4.35 and 4.78 percent, starting in 2011.

The rates in the Senate's version of HB 1324 adopted Thursday are 1.7, 3.4, 3.6, 4.25 and 5 percent, starting Jan. 1, 2010. They were proposed by Sen. David Hogue, R-Minot. The bill also eliminates North Dakota's long form tax return.

Hoeven's income tax reduction bill, killed in February in favor of HB 1324, had proposed new rates of 1.68, 3.5, 3.92, 4.62 and 5.12 percent, starting this past January.

The Senate has also adopted changes to a corporate income tax reduction bill, House Bill 1255, that were proposed by Sen. Joe Miller, R-Park River.

Like a version that the House passed in February, it reduces corporate income tax rates while also reducing the number of brackets from five to three. Both the House and Senate versions also put many more corporate income tax payers into a lower bracket.

Under current law, only corporations earning less than $3,000 taxable income get the lowest rate of 2.6 percent.

Under the House and Senate versions of HB 1255, corporations earning up to $25,000 will pay the lowest rate of around 2 percent and only those reporting taxable income over $50,000 would pay the highest rate of around 6.5 percent.

HB 1255 also must now be considered by the Senate Appropriations Committee.

By the end of the session, House and Senate must agree on identical versions of both bills.