North Dakota's income tax reform (SB 2302, 2023) dramatically simplified and reduced income taxes: married filers now pay a flat 1.95% on all income — one of the lowest flat rates of any income-tax state in the US. Single filers pay 1.95% up to $44,725 and 2.5% above that.
North Dakota's oil-producing economy (Bakken formation) provides significant tax revenue that allows the state to maintain very low personal income taxes. The Legacy Fund (funded by oil and gas tax revenues) and the state's history of budget surpluses mean North Dakota can maintain competitive tax rates while funding services — a unique fiscal position compared to most states.
North Dakota's 2023 reform was one of the most dramatic income tax reductions in any US state in recent memory. Prior to 2023, North Dakota had rates up to 2.9% with multiple brackets. The 2023 reform collapsed this to a near-flat structure:
| Filing Status | Taxable Income | Rate |
|---|---|---|
| Married Filing Jointly / Head of Household | All income | 1.95% flat |
| Single | $0 – $44,725 | 1.95% |
| Single | Above $44,725 | 2.5% |
Practically all married North Dakota residents pay a flat 1.95% on all taxable income — regardless of income level. For a married couple with $200,000 in taxable income, North Dakota income tax is $3,900 — compared to $18,000+ in California or $12,000+ in Minnesota.
North Dakota is the nation's third-largest oil producer (after Texas and New Mexico). The state's Bakken oil formation produces 1+ million barrels per day. Oil and gas taxes, including extraction taxes and production taxes, generate hundreds of millions in annual revenue. The Legacy Fund — established by a 2010 constitutional amendment — accumulates 30% of oil and gas tax revenue. The fund has grown to $10+ billion, generating hundreds of millions in investment income annually. This revenue allows North Dakota to maintain low income and property taxes while funding state services.
North Dakota's very low income tax rates mean that even retirement income that is not explicitly exempt is taxed minimally. At 1.95–2.5%, a retiree with $100,000 in IRA distributions pays just $1,950–$2,500 in North Dakota tax. North Dakota fully exempts Social Security benefits from state income tax for all income levels (changed in 2021 — previously Social Security was taxed).
North Dakota's property taxes are near the national average at approximately 0.96% effective rate. The state sales tax is 5% — relatively low — with local additions and grocery exemptions.
| County | Effective Rate | Annual Tax on $300K Home |
|---|---|---|
| Cass County (Fargo) | ~1.12% | ~$3,360 |
| Burleigh County (Bismarck) | ~0.96% | ~$2,880 |
| Grand Forks County | ~1.01% | ~$3,030 |
| Williams County (Williston) | ~0.72% | ~$2,160 |
| Stark County (Dickinson) | ~0.81% | ~$2,430 |
North Dakota's 5% state sales tax is among the lower rates nationally. Combined with local additions, Fargo reaches 7.5%, Bismarck 7%. North Dakota exempts groceries (most food items) from sales tax — keeping the effective consumption burden low.
| Category | North Dakota | Minnesota | South Dakota |
|---|---|---|---|
| Top income tax rate | 2.5% (single) / 1.95% (married) | 9.85% | 0% (no income tax) |
| State sales tax | 5% | 6.875% | 4.5% |
| Avg property tax | 0.96% | 1.02% | 1.20% |
North Dakota's combination of very low income tax (1.95–2.5%), moderate sales tax, and near-average property tax creates one of the lowest total state tax burdens in the Midwest — second only to South Dakota's zero income tax among regional peers.
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