ND Outlook – Some Tax Data

There is so much left unclear right now that the outlook seems to change significantly on a daily basis depending on how we work in the latest information into the models. What is clear is that we probably have not seen the end of the use of the term “unprecedented” when applied to the economic circumstances of the nation or the state. There are some reasons to believe we have a better situation in place than many other states, but I think most people realize this can change very quickly.

Critical factors in these scenarios are the pace of recovery, not just locally but nationally. There are two major disruptions to consider, and they are correlated. We have an enormous demand shock right now impacting sectors in asymmetric fashions. That is creating a massive supply chain disruption for most industries and much of the country. Re-opening economies is important, but even after it happens there are adjustments and changes in behavior that will persist and make a big difference. In a meeting this week I suggested that we need to be ready for a period of a 75% economy. Business will be back, but people may still stay away.

The impact for factors like taxes is also unclear. There are connections and correlations in the various factors in North Dakota. The most common connection people seem to get is that something like the oil industry impacts oil and gas tax collections, but can have a profound impact on sales tax collections as well.

The model right now says state sales tax collections could be down by 50% over the next two years. These numbers include some opportunities for recovery in some months and like I said, there are some serious questions in the forecast. As an example, if k-12 education includes a significant online component next year this raises questions about purchases of “Back to School” supplies, which often account for larger sales in certain months.

What will happen with certain cross border trades? That seems to be a continuing question and we will be working to address that with differing scenarios as we go forward.

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