Federal Law to Reduce State Tax Collections in North Dakota

Matt Peyerl. (Photo by Michael Achterling/North Dakota Monitor)

(North Dakota Monitor) – The North Dakota Tax Department estimates the state’s income tax collections will take a sizable hit as a result of federal tax legislation, though the impact will be smaller than in many other states.

Matt Peyerl, associate director of tax administration for the department, told lawmakers to expect an estimated $129 million reduction in individual and corporate tax income collections during the 2025-27 budget cycle due to the 10-year budget reconciliation law.

That equates to approximately 9% of the state’s individual and business income taxes and 2.5% of the state’s total tax and fee revenues collected in the 2023-25 biennium.

The reduction in income tax collection is expected to decrease to $93 million in the 2027-29 biennium, according to the tax department’s estimates, before falling off to $26 million in the 2029-31 biennium when many of the changes expire.