North Dakota has quietly built one of America’s most competitive tax systems by channeling billions of dollars in oil revenue to keep direct burdens on residents and businesses relatively low. New U.S. Census Bureau data released June 18 show just how heavily the state relies on energy production to fund government operations.78
The state’s oil wealth, centered in the Bakken formation, drives substantial severance taxes. According to U.S. Census Bureau figures for 2023, taxes on oil and gas production accounted for about 41 percent of the roughly $7.72 billion in total state and local tax collections that year.20
North Dakota collected approximately $9,834 per resident in state and local taxes in 2023, among the highest levels in the nation, despite maintaining relatively low direct tax burdens on workers and businesses.56
This approach allows North Dakota to rely far less on individual income taxes than most states. The state maintains a graduated income tax with a top rate of 2.5 percent — one of the lowest for states that levy one — and a flat corporate rate of 4.31 percent.
Analysts say North Dakota’s energy-backed revenue model allows the state to collect substantial tax revenue while maintaining relatively low burdens on workers and businesses. Some observers argue it compares favorably to Florida and Texas in areas such as property tax treatment for energy assets and overall fiscal stability, even as those larger states attract significant migration with no personal income tax.20
North Dakota ranks 11th overall on the Tax Foundation’s 2026 State Tax Competitiveness Index. That competitiveness is underpinned by a resource base few states can match.18
North Dakota continues to produce more than 1.1 million barrels of oil per day, making it the nation’s third-largest oil-producing state and providing the revenue foundation that supports its competitive tax structure. Leading operators include Chord Energy, Continental Resources, and ConocoPhillips.
For businesses and investors, the model means a state that collects significant revenue without heavy reliance on payroll or corporate income taxes. This can translate into lower operating costs for manufacturers, energy firms, real estate developers, and entrepreneurs evaluating relocation or expansion. Lower direct burdens on residents also support consumer spending, job growth, housing demand, and broader economic activity in a state with room to expand its business base.
North Dakota’s success highlights how resource-driven revenue can fund government services while allowing tax relief — a relevant consideration for companies and investors seeking stable, pro-business environments.
If energy output remains robust and leaders keep directing resource wealth toward reducing burdens rather than expanding spending, North Dakota could emerge as one of the most closely watched economic models in the country — demonstrating how a resource-rich state can deliver low taxes, sound finances, and attractive conditions for business investment and growth at the same time.
JBizNews Desk
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