Rapid City Opts Out for $6M; Adelstein Says Residential-Ag Tax Equalization Could Yield $3M

Dr. Tim Mitchell, superintendent of the Rapid City Area Schools, addressed the Black Hills Forum and Press Club this noon in Rapid City. The main topic of the conversation was the six-million-dollar, five-year opt-out the Rapid City School Board passed Tuesday night. Per $100K of property value, the RCAS opt-out will levy an extra $72 on residential property, $30 on agricultural property, and $150 on commercial property.

Stan Adestein (left) poses a question to Dr. Tim Mitchell (right) about property tax classification and school funding. Bill Walsh (center), co-organizer of Black Hills Forum and Press Club, prepares to cut Adelstein's mic if he starts speechifying.
Stan Adestein (left) poses a question to Dr. Tim Mitchell (right) about property tax classification and school funding. Bill Walsh (center), co-organizer of Black Hills Forum and Press Club, prepares to cut Adelstein’s mic if he starts speechifying.

During question time, Black Hills magnate and former legislator Stanford Adelstein took the mic to ask the superintendent if the district had calculated how much revenue it would gain if it taxed agricultural land at the same rate as residential land. Obviously the district had not, since the 2.6:1 ratio between residential and ag levies is prescribed by state law.

But not to worry: Adelstein wasn’t really asking a question. With spreadsheet in hand, he offered the answer: this… what shall we call it? tax break? government subsidy?… lower levy on ag property denies the Rapid City Schools three million dollars a year, half the amount of the opt-out.

Does Stan have a plan to stop revenue from agri-business slip through our schools’ fingers? Or is there an economic logic to charging farmers 42% less per dollar of value than homeowners and 80% less per dollar of value than businessowners?


54 Responses to Rapid City Opts Out for $6M; Adelstein Says Residential-Ag Tax Equalization Could Yield $3M

  1. Just wondering, but do Rapid and Sioux Fall along with our other larger communities subsidize the education costs of our more rural school districts?

  2. Paul Seamans

    Jana, up until this year the smaller, more isolated schools received a sparsity factor payment of, I believe, a maximum of $600 per student. As I understand it this years legislature/governor have changed things so that sparsity money will be done away with in the next two years. The bigger question to me is why are property owners expected to pick up the biggest share of education expense?

  3. Mr. Seamans you are so right. We should be making 100% of the money that goes to schools come from the sales tax, and leave property tax payers alone. Reduce the property tax and put every penny of that back into the sales tax.

  4. maybe an income tax.

  5. No. We all know that is impossible, Owen. So all the people paying from their right-hand property tax pockets need to quit whining or pony up with their left-hand sales tax pockets.

    Face it folks, if we want to pay good teachers more (and 50% of the math teachers in South Dakota are sub-par apparently) we need to pony up the bucks. I say, let the sales tax broad base absorb those increases instead of sticking it to the property tax fellows.

  6. I give you credit Grud. You’re actually proposing something and trying to solve the problem. That’s more the our Governor and the Republicans in this state want to do.
    A income tax might be the fair way but you’re right Grud. It won’t happen

  7. So if the property tax whiners want to whine, let us shift all the monies to their sales tax. Then when they buy their fancy cars and wines they will pay for it that way. I get so sick of whiners.

  8. Also it should be a flat sales tax. It shouldn’t matter where you spend it or what you spend it on, a flat percentage no matter what of your spend should get taxed. Then we could remove the property taxes that are so doubling down on some people. Also this way we tax those people who do the pay day loans because we tax you on what you spend.

  9. We could say we are “moving the tax weight to be more fair” or something like that. “Carry your weight and haul your freight” would be a catch slogan.

  10. Donald Pay

    How about taxing income? Stan’s game is to pit one property taxpayer against another so that we don’t bother to consider taxing the money he’s making from his investments. Until South Dakota taxes all the sources of wealth fairly, you can’t solve the education funding issue. I really do appreciate that Stan has stepped in to save some school programs with his generous contributions. But if the state taxed income, schools wouldn’t have to depend on Stan’s generosity, or hit up property taxpayers for more money.

    Here’s the problem with Stan’s plan to increase taxes on ag land: it drives off real family farmers and ranchers and favors wealthy hobby farmers/ranchers who farm the tax code and get ag subsidies while living in coastal zip codes.

    Maybe the statutory ratio should be fiddled with, but ag land just isn’t the same as residential or commercial property, and shouldn’t be taxed as if it is. If you want a different statutory ratio, fine, but it should come with looking at an income or production component, so that small farmers/ranchers get a bit of a break.

    The real issue is the failure of the state to fund education. My opinion has always been that the state is shirking its constitution duty. And the state really can’t fund education properly that without an income tax.

  11. then take the tax off of food and clothes

  12. Roger Elgersma

    Conservative Rapid City trying to raise their own taxes. Seems like an oxymoron. But even though conservatives quite often seem to just want to keep money they do also have kids that they care about.
    So what is the fair way to tax. Historically real estate taxes were used for schools. That is a tax the wealthy priority. But farmers have much more real estate per worker than most any other industry. So they get lower rates so they would not have to pay for most of the schools. School districts that have a lot of land per student, most extreme is ranches with thousands of acres and very few kids, they did not have to tax at a high rate for their own schools. Inner city with lots of kids and poor neighborhoods had lots of kids per real estate dollar. So now they figured out that if you do not subsidize the huge ranch areas for a few kids they might actually do a little more consolidating.
    Sales taxes seem to tax the poor harder than the rich. But we are accustomed to that so we keep doing it. We are not accustomed to income tax so we do not do that. Although it would tax those who can afford it when they can afford it. So, since we are creatures of habit, we will make small changes. But it is good to see that Rapid City is going to try to get better teachers. We get the bad math teachers since we do not pay enough to get the good ones to even take the test. Other states find it hard to get enough good math teachers so that is where we see the s–t hit the fan when we do not pay enough.

  13. Roger Cornelius

    The best part of this discussion is that SD “no more taxes” republicans are having to talk about raising taxes and that is not that pesky bunch of Democratic liberal that are taxing and spending.

  14. barry freed

    An Initiated Measure that repeals the Property Tax and replaces it with an Income Tax.
    We pay when we are in the workforce and don’t fear losing our houses after we retire.

  15. Paul, Senate Bill 53 is the education funding formula law. I don’t see any language in that bill that phases out the sparsity factor. Was there separate legislation to that effect?

  16. Grudz has a limited imagination. Why is an income tax impossible? I say have the discussion, educate the voters, and see what happens. A tax is a tax. A tax is meant to capture some reasonable percentage of the community’s wealth to support public goods and services. If an income tax can do that more effectively and fairly than a property tax or sales tax, we should explain that to the citizens and get their support.

    A sales tax seems preferable perhaps because it is deceptive. People pay it a few nickels at a time. They never see their full sales tax bill as one yearlong total they way they see their income tax and property tax. If we could somehow tally purchases throughout the year and send people sales tax bills on January 1, people would howl.

    Income tax is doable. We do it at the federal level. Most other states (43) do it. “We all know that income tax is impossible” is an effort to shut a viable policy option out fo the conversation, not a factual statement.

  17. Barry, you make an interesting proposal. I’ve heard people say that South Dakota’s problem is that, while most states rely on the “three-legged stool” of sales, property, and income taxes, South Dakota relies on a two-legged stool. Replacing property tax with income tax leaves us on two wobbly legs. And there are areas like teacher pay where we need more revenue.

    But the point you make about paying while you work and not losing your house when you retire points to the idea that, independent of the final revenue number, an income tax may be more fair than a property tax. Taxpayers are better able to bear taxes when they are working than when they have retired on their pensions. We have to monkey-rig the property tax system with freezes for the elderly to mitigate that burden; an income tax would take care of that problem up front, without contortion. You have income? You pay. You don’t have income? You don’t pay.

    On that basis of fairness, I could entertain Barry’s straight replacement proposal. But do we have some passionate defenders of the three-legged stool?

  18. Paul Seamans

    Cory, I haven’t studied SB 53 but I guess I’ll have to. Gov Daugaard has been bragging that he has raised state aid to education from the mandated 1.5% to 2.0% (I believe these are the correct figures). He has done this by eliminating the sparsity factor and shifting this expense to the local district. $3 million will be shifted the first year and then the full $6 million thereafter. I believe that the maximum sparsity factor was $600 per student. For my county of Jones with about 130 students this would shift $78,000 to local property tax payers and put this savings to the state into the state kitty to be dispersed amongst all the schools. The Governor only increased state aid to education by this sleight of hand magic. Someone please correct me if I am wrong on this.

  19. Oh, and Jana at the top! Yes, big towns do subsidize the small town schools, not through property tax, which covers local effort, but through sales tax, which produces the state aid.

    But one could argue that the big towns are simply sending back the sales tax dollars that all the rural folks come spend in the big towns on the weekends, at state tournaments, at Rib Fest….

  20. That is the shift of hand out of the past in so many ways, Paul. Video lottery tax to education. Yes but that same value shifted out of Ed as gambling went in.

  21. Big towns, Cory? How about the thousands we spend into those big towns as farmers, ranchers, tourist and transient. Big towns don’t own us.

  22. An income tax is not possible unless you tax the welfare income of some too. Nothing exluded, not a dime going into your pockets. And at the same rate for everybody. Say 10%. 10% of the $60,000 teacher and 10% of the $33,000 minimum wage worker.

    Taxing food hits those who eat more harder and that seems fair even to me.

  23. Businesses should be allowed to ban obese people: airlines and taxi services should charge more for fat people. Scales and Body Mass Index stations should be outside stores where food is sold. Businesses with buffets should have scales at the door and anyone with a BMI over 23 will pay an additional $1.00 for every whole number above that.

    Food stores should have scales at tills that add surcharges according to BMIs. Gas stations should have scales that determine price per gallon according to BMI unless you have documentation in your debit/credit card updated by your doctor that you’re on a weight reduction regimen.

  24. Indeed. And there should be nicotine tests at all retail sales points and smokers should pay double.

  25. One element I have never understood about property taxation is this: ag and commercial land are by their nature revenue generating – those properties produce income for the owner – they “earn” their tax assessment; residential property is not revenue generating. Therefore, ag and commercial seem more like an income tax, whereas residential seems more like a wealth tax, a tax that the residential property itself cannot “earn.” Ag and commercial owners have an advantage in property taxation.

  26. Somebody please explain why agricultural land is taxed at a rate much less than commercial property when are used in for profit business. Thank you

  27. Construction man generates 150,000 dollars off his ten acres that holds construction equipment. Rancher owns a small ranch worth 1.3 mil and nets 40,000, old guy. How much do you figure a hamburger should cost, old guy?

    BTW, that is 2.3% return on the cost of investment.

  28. mike from iowa

    However, every state provides some type of preferential treatment for farmland: Farm fields are assessed at below market value as long as they are being actively used for agriculture production. This preferential treatment began in the 1960s in response to the massive conversion of tens of millions of acres of rural land to non-agricultural uses.
    Farmland left on the fringes of growing urban areas tends to jump in value; as a result, an agricultural producer’s income doesn’t keep pace with escalating property tax bills.
    Preferential assessment, then, has been justified as a policy to protect family farms and to keep land in farm use.

  29. mike from iowa

    Here is a website explaining all this,oldguy.

    http://www.csgmidwest.org/%5C/policyresearch/1012aglandtaxes.aspx

  30. Let’s consider a gross income tax on ALL income with no deductions nor exemptions. A simple percentage levied against all income will generate more revenue for the state and eliminate property tax completely.

  31. Do not tax my property, tax my income on a flat rate basis, or better yet tax every single thing including food that I buy. Tax me the same as the guy next door. No carve outs and no exemptions. None. Zero. And if out of staters come here we should keep the sales tax just for them.

  32. of course taxing 10% to someone making $30,000 a year hurts more then 10% somebody who make 100,000 a year

  33. Deb Geelsdottir

    Grudz, you want to tax this person just as yourself? She’s 53 years old, has Downs Syndrome with an IQ of 63, and gets $650/month that pays for every single thing she needs: Rent, food, clothing, all medical copays and deductibles, transportation, some medications, etc.

    Is that what you want Grudz? 10% of her income to taxes? That means she has to pay for all that with less than $600/month. Doesn’t seem very fair to me. In fact, she won’t be able to cover all those expenses on $600, so she’ll be going to be a much more expensive burden on the local government. Or she’ll just die and be out of the way. That’s not the kind of community SD ought to have.

    Grudz, you always like to imagine that it’s only the few nasty cheaters who will be hit by your plans. Those types, whom I’d like to stop too, will simply figure out another way to game the system, sort of like the JP Morgan scammers. In the meantime, your plan will simply add to the suffering of those who are the most vulnerable. (This is why the last 2 popes said Republican economic plans are not Christian.)

  34. What’s your plan, Ms. Geelsdottir? A system where you get to pick who pays and who doesn’t?

  35. Owen, it hurts both 10%. An equal hurt. 1 dime from every dollar.

  36. Deb Geelsdottir

    Grudz, I asked you several questions. Will you answer?

  37. Yes. Yes. Yes.

  38. Sorry, I should have said, “Yes, I will answer. Yes, Yes, Yes.” Unless you have a better idea. Let me hear it.

  39. Deb Geelsdottir

    Grudz, I’m sorry to say that sounds cruel to me. I am more than willing to pay higher taxes than people such as the individual I described, and others like her. My conscience will not allow me to maintain more comfort on the suffering of others.

    My plan is a progressive income tax. The higher the income, the higher the percentage of taxation. I don’t have a detailed plan. I don’t have the expertise to create one. For me, using my particular understanding of ethics and morality, that means kindness and generosity are paramount.

    Grudz, I don’t need or want that much. I want a small house or apartment. I’d like 2 bedrooms, but one is okay. I want to afford some recreation and entertainment. I’d like to travel around the world, but I’ll be fine with seeing more of North America. I want reliable transportation.

    I need the basics – food, clothing, shelter.

  40. I say all pay the same. No slamming on the people who work harder to subsidize the ones who slack off. A dime a dollar.

  41. Paul Seamans

    When a young person/couple first buy a ranch they are usually dirt poor but still have a huge tax liability. Let’s suppose they start out buying 2000 acres of rangeland at $1000/acre. If they borrow all this they have no equity yet but they will have to pay property tax of around $2.50/acre times 2000 acres or a property tax bill of $5000. After paying interest on the $2 million dollars and buying 70 cows at $2000 head and buying machinery it doesn’t leave much. The property tax to them is a major expense, better for them to be taxed on their income.
    I could never figure out why it’s fair that an older/richer person can take their $2 million and invest it in the stock market and they will pay a much smaller tax on their investment (capital gains of 15-20%) than the person who buys land and tries to make a go of it that way.

  42. That, Mr. Seamans, is why a consumption tax is the best tax. It should not be what you own and have to keep paying to keep owning, it should be what you consume. No libbie can argue with me on that and win, for I have already won.

  43. Paul Seamans

    You have a good point, Mr. grudznick.

  44. That’s just one of the things I love about you, ‘grudz.’ Always open-minded.

  45. mike from iowa

    10% tax doesn’t hurt everyone equally. And it certainly isn’t fair to the have nots.

  46. What Mike said. Treating everyone exactly the same mathematically is not always fair. Progressive income tax more fairly lays burdens.

  47. Note that Grudz’s “all pay the same” isn’t really the same. Grudz says the guy making $10,000 pays $1,000, while the gal making $1,000,000 pays $100,000. Grudz arbitrarily chooses “percentage” instead of “dollar figure” as the standard for “same.” Deb and I are no more arbitrary in counterproposing a progressive income tax, in which our standard for “same” is “sacrifice of utility.” 10% takes much more utility away from the thousandaire than from the millionaire.

    That said, is it possible that South Dakota’s property tax, which assesses the same tax on property owners regardless of their economic situation, is less fair than a flat-rate income tax? Les’s suggestion isn’t great, but is it better than what we have?

  48. larry kurtz

    grud = derp.

  49. Nick Nemec

    If Grudz wants everyone to pay the same, how about this? Let everyone pay the same on all income above some base amount. No income tax on first $50,000 then tax all above that amount. $50,000 isn’t a magic number I’ve done no research and am just tossing it out to get the discussion started. Everyone gets the same baseline deduction to pay basic expenses. Has Grudz done any research on the 10% he advocates?

  50. I agree, Nick: everyone deserves something like the standard deduction, representing the basic cost of sandwiches and a roof.

  51. barry freed

    I don’t carp about sales tax as we sting a lot of tourists with it, but Property Tax can not be fair as it is totally subjective since no two houses are exactly alike. Some buy $500 Stoves while others buy $5000 Stoves. The only fair standard should be: Tax according to what the house or ag land would rent for if the owner moved out.
    We could go back to four legs and resurrect the Personal Property Tax. I remember my Mom reading in the paper that we had one of 3 color TV’s claimed in Rapid City during the 70’s. Property Tax is just as corruptible as no one volunteers to the Accessor they paid $5,000 for a stove.
    In Montana (no Property or Sales Tax) Tax Rates.org says a $40K income will pay $1,800 in taxes to the State. That is about the tax burden of a 900 square foot house with basement in Robbinsdale of Rapid City.

  52. Remember that SD is in the minority of states that apply our sales tax as heavily on groceries as other items. We made that tax even more regressive a few years ago in the name of ‘streamlining’ sales tax. This required those communities which had exempted groceries from their local sales tax to begin collecting it. We tax almost everything in SD – except, of course income. The problem is that in addition to having merchants serve as tax collectors, the state extracts its pound of flesh on every purchase – new or used – and no one wants to buy used food.

  53. magnate? wonder how subsidized mining is?