This is a rush transcript from "Your World With Neil Cavuto," August 3, 2009. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, a lot of states are hiking taxes to make up for budget shortfalls, not in North Dakota, though. It is one of three states actually slashing income taxes this year.

North Dakota Governor John Hoeven is joining me now on the phone.

We were having some problems with the remote, Governor, so thank you for your patience and working through this.

Governor, there is a novel concept, cutting taxes. Why?

GOV. JOHN HOEVEN (R), NORTH DAKOTA: Neil, good to be with you.

Video: Watch Neil's interview with North Dakota's governor

Well, it is about building the best business climate we can, and that is more important now than ever with the national, really international, recession we are going through. And so we cut not only income taxes, both personal income tax, corporate — and corporate income tax, but also property taxes.

And, again, we're — we are very aggressive in economic development.

CAVUTO: All right. Now, does that aggression apply — or aggressiveness apply to cutting state spending? Because that was a concern. And some thought that maybe something would have to give.

What — what have you done?

HOEVEN: Well, we have grown our economy. And it's that growing economic base that has enabled us to continue to fund parties like education, health care, roads, and infrastructure, strong law enforcement, but, at the same time, reduce our tax rate.

And that is what economic development is about. It is about growing the pie, but then making sure you return some to taxpayers, build a good reserve for the future, and fund your priorities.

CAVUTO: You know what the president and leading Democrats have been saying in Congress, and then probably by extrapolation, sir, that North Dakota is not Washington. North Dakota is not a big, highly populous state, so what is working for you there is not going to work nationally, or certainly in — in bigger, more populated states.

What say you?

HOEVEN: You know, I think it can work nationally. When you look at what we're doing, we have worked very hard, not only to build the positive business climate I'm talking about, but to diversify our economy.

And, for example, the energy sector and — and the ag sector have helped us, but we have diversified into other areas. And just to take one example, if you look at what we're doing in energy, we are growing all our energy resources, both traditional sources, like oil and gas, clean coal technology, but also the renewables, wind, the biofuels, biomass and others. And I think that is the right approach for the country as well.

CAVUTO: It's a crazy concept, tax cuts.

Governor, thank you very much. And thank you for enduring all the technical problems as well. Very good having you.

HOEVEN: Thank you, Neil. Appreciate it.

CAVUTO: Governor Hoeven.

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