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North Dakota House votes for tax rebates

BISMARCK - North Dakotans would get back about one-third of the state income taxes they paid in 2007 under a bill the House approved Tuesday.

House Bill 1324 was one of several tax bills the House voted on Tuesday, when it also OK'd an exemption from sales tax for clothing sales, reduced the top corporate in-come tax rate from 6.5 percent to 6.1 percent and limited the ability of cities and counties to assess sales taxes.

The House rejected several other income tax bills, some of which were similar to HB 1324. The rejected bills included Gov. John Hoeven's proposed income tax relief that was in House Bill 1279.

An estimated $100 million in rebates would be paid out this spring or summer under HB 1324 if the Senate approves the same measure. The governor's bill would have provided the same amount of relief over the next two years but not as an immediate rebate.

HB 1324 also calls for permanently lowering the state's individual income tax rate on July 1, 2011, by about 13 percent across the board.

The bill passed on a 53-40 vote after some House members said the lower tax rates in the bill are regressive, providing disproportionate relief to high-income individuals and families.

Rep. Eliot Glassheim, D-Grand Forks, said he didn't oppose a one-time tax give-back but warned that if the Legislature cuts the income tax rates permanently, "once you change it, you'll never get it back."

But House Majority Leader Al Carlson, R-Fargo, said, "We can adjust anything we want, every two years."

The new lower corporate income tax rates are in House Bill 1255. The bill also raises the amount of income at which corporations would owe income taxes from $30,000 to $50,000 and reduces the brackets from five to three. The bill passed on a 57-36 vote.

Other tax cut bills that were defeated in favor of HB 1324 were House Bill 1563 and House Bill 1429, which would have used an income tax credit to provide a sales tax rebate to North Dakotans.

The bill creating a sales tax exemption for clothing, House Bill 1268, brought a protest from Fargo and Bismarck legislators who said it would also cut the sales taxes cities take in, which will, in turn, lead cities to replace the money with higher property taxes.

"This is a $2.4 million hit on the property tax payers in Bismarck," said Rep. George Keiser, R-Bismarck.

The bill passed on a 66-26 vote.

The bill affecting city sales taxes is House Bill 1517. Beginning Aug. 1, cities can't pass a sales tax higher than 1 percent without 60 percent of its voters approving it. And cities that have rates higher already can't increase them without a 60 percent vote. Cities with higher city sales taxes that have expiration dates on all or a portion of the sales tax will also have to hold a vote in order to extend the rate. The bill passed 51-40.

All the bills the House passed now go to the Senate for further consideration.