Sixer Surtax Could Fund Blue Ribbon K-12 Pay Raise Plan

My post this morning on Dr. Chicoine’s impending reliance on Monsanto for the bulk of his income got one eager reader reviewing the complete list of state employees making over $100,000 (see pp. 26–35 of Governor Daugaard’s complete FY2017 Budget Book). That reader got me thinking about how South Dakota’s elite wage earners, public and private, could cover the Blue Ribbon pay raise for our teachers.

From $557,308 for USD Med School Dean Mary D. Nettleman to $100,470 for Public Utilities Commission exec Patricia Van Gerpen, the State of South Dakota is paying 352 six-figure executive salaries totaling $53,310,378.

The Governor’s budget proposal says we have 12,701.1 FTEs in the current state budget. His budget proposal says we can cover a 2.7% “market adjustment” for all permanent state employees with $23,462,167. Dividing, I figure that those 352 six-figure-salaried state execs make up 2.8% of our state jobs and are claiming 6.1% of the state’s payroll.

Let’s think about how we could get the 20% “market adjustment” that the Blue Ribbon K-12 panel says our teachers need. (I maintain the Blue Ribboneers should aim higher, but let’s keep this post simple.)

Suppose we charged those state execs a surtax on the income they make over $100,000. For example, we won’t touch the first $100,000 that PUC exec Van Gerpen earns, but we will take a slice of the last $470.

How big a slice? Well, since we’re charging this surtax only on six-figure incomes, and since everybody in South Dakota knows that income taxes are the devil, let’s set that rate at six and two-thirds percent, 6.66%. I like that rate because, when most of those execs claim this new six-figure surtax as a deduction on their federal income tax, they’ll avoid paying at least 25% on that amount, meaning that 6⅔% state surtax is effectively a 5% tax or less.

Impose this sixer surtax on South Dakota’s 352 best-paid state employees, and we’ll get back $1.2 million.

Now, let’s figure out how many six-figure salary takers we might have statewide and how much they would pay under the sixer surtax.

Remember that I said those 352 top earners make up 2.8% of our state government workforce? If a similar percentage of all workers in South Dakota earn six figures, then out of 439,455 active jobs in October 2015, we should be able to find about 12,179 South Dakotans earning six figures (including the 352 working for the state).

The Bureau of Economic Analysis tells me that in 2014, South Dakota’s personal income totaled $38.63 billion.

If all of the six-figure earners in South Dakota are claiming the same 6.1% of personal income that state government’s six-figure earners are claiming of state payroll, then those 12,179 workers are earning $2.37 billion.

Exempt their first $100K, tax the rest at 6.66%, and the sixer surtax produces $76.8 million, which we redistribute to our 9,362 teachers to raise their pay by $8,200 each, a 20.5% market adjustment above their current average of $40,023, and a nice “thank you” to teachers for making people smart enough to earn six figures.

If the sixer surtax sounds too complicated or devilish, consider that we could get the same $76.8-million boost for teacher pay by taxing that total $38.6 billion at a rate of 0.2%.

Two dimes out of every hundred dollars you make funds the Blue Ribbon K-12 teacher pay plan. Four dimes ties us for the best teacher pay in the region.

Tax everyone? Tax the 2.8% on their six-figure salaries? There are many paths to solving the teacher shortage with competitive wages. Our legislators just have to do the math and show some guts.


21 Responses to Sixer Surtax Could Fund Blue Ribbon K-12 Pay Raise Plan

  1. Jason Sebern

    This is a plan I can strongly support. As a public school teacher I dislike the idea of asking all South Dakotans to pay more sales tax at the grocery store. Your plan taxes those who can afford to pay more to our educational system. Well done!

  2. Roger Cornelius

    Could we also identify any of these top paid state employees that are double dipping by being members of other state boards or serving as consultants, as in Gear Up?
    Add those additional incomes to Cory’s formula as well.
    And as usual when it comes to state taxes that are paying these exorbitant salaries, I have to ask how much is being paid into GOP war chests?

  3. Charlie johnson

    Implement a gross income levy on all incomes including but not limited to salaries, farm, interest. Then fully fund the school aid formula with this levy while at the same eliminating property taxes funding the SAF. Then back fill potential salary increases or program enhancement with a property tax levy limited to 2 mills. Thus local control dictates salary enhancement , not Pierre .

  4. The Government Representative Union for Employees would never allow it. And the GRUE has teeth.

  5. mike from iowa

    Just checked iowa’s payroll. 265 people made at least 300k in 2014, The top paid employee is the head football coach at U of iowa at nearly 4 million. Around 45 or so get a half million per year.All of these top paid people are at the major Universities.

    Here is a look at the athletics budget of major colleges. This is interesting.

    https://collegeathleticsclips.com/news/thegrittyoniowasfy2015athleticsbudget.html

  6. Lanny V Stricherz

    Remember that in addition to T Denny himself, his two CEOs, Kelly Krabbenhoft and Dana Dykhouse already give million dollar donations on a regular basis, so, they should be the leaders in suggesting this tax to make it happen.

  7. larry kurtz

    Anyone not seeing Cory’s tongue pressed roundly into his cheek while wrote this post is delusional.

  8. larry kurtz

    articles are terrible things to waste, init?

  9. larry kurtz

    Running people out if South Dakota who make six figures while on the public dole makes sense.

  10. That what happened to you, Lar?

  11. Don Coyote

    Collecting a surtax (a tax levied on top of another tax) on a tax (income) that doesn’t exist is a fool’s errand. Have at it Corey.

  12. I don’t know if the union represents management. And this being South Dakota, how many are actually members of the union? And don’t forget, if they were represented by the Teamsters, they’d be taking a pay cut. That’s what James Hoffa Jr.’s Teamster Union does now, negotiate pay cuts for employers, rather than raises for employees.

  13. Mr. Coyote isn’t even taking into account that the State GRUE would never allow it to happen. It would be interesting to see Mr. H battle the GRUE in the legislatures over this. Libbie against Union. Who would win?

  14. Scott ups driver make the top wages in the trucking industry.By law companies could buy their liability.Had Hoffa been tougher with contract, THIS WOULD NOT BE HAPPENING TODAY.

  15. Larry misportrays this article as satire. I’m serious. I’m offering two policy alternatives, which is two more than most Republicans this session will offer or support.

    Mike, SDSU’s head football coach, John Stiegelmeier, only makes $195,500. That’s peanuts in Division I, but it’s more I think than any professor at SDSU gets. I hear the new coach at USD is getting $255K.

  16. I give you two options, Don C: tax incomes over $100K at 6.66%, or tax everybody at 0.2%. Which do you prefer?

  17. Douglas Wiken

    SD schools have something between $600 million and $800 million in reserve funds sitting in banks subsidizing them with more cheap money. Continuing to over tax at current mil levies will continue to generate surplus revenue.

    In any case, I am all in favor of an excise tax on highly paid lackeys in the SD government system. I am not at all convinced such high pay is necessary to keep people here for government. As for coaches, the whole athletic system needs to be disbanded. College students should not be forced to support jocks. Make the college athletic fees voluntary, and another problem will be solved. Football should be banned in all K-12 systems. Brains are a terrible thing to damage.

  18. Charlene Lund

    I really like your two options Cory. Thanks for the blog.

  19. Thanks, Charlene! Share those options with your legislators… and get some friends to second the motion!

    Douglas, my October report said that at the end of FY2014, schools were sitting on $236 million in reserves, about 28% of their general fund expenditures. Can you point to the additional hundreds of millions your comment suggests?

  20. Lanny V Stricherz

    Just got this email from our Congresswoman. I wonder if it applies at the state level as well. Ha Ha. Sure hope that her former colleagues in Pierre remember this when it comes to the debate on increasing the sales tax.

    Dear Friend,

    It always seems like the holiday season is never long enough, doesn’t it? I know I still have some shopping to do, a few more cookies to bake, and a couple more decorations to put up. But before all of that, I am working to get all our year-end legislation wrapped up.

    This afternoon, we passed the Protecting Americans from Tax Hikes Act. Tax hikes limit growth because they ultimately limit economic opportunities. Fortunately, we were able to fight off many of these tax hikes, protecting families, students, farmers, ranchers, small businesses and countless others from having to hand over even more of your hard-earned dollars at tax time.

    The legislation we passed today makes a number of temporary tax provisions permanent, delivering predictability, clarity and certainty for families and job creators. Included in the list of permanent extensions are:
    Section 179 business expensing limitations, which are important to many South Dakota farmers, ranchers and small businesses
    Improvements to 529 college savings plans
    Deduction for state and local sales tax
    Deduction for certain expenses of elementary and secondary school teachers
    Deductions for charitable giving
    The legislation also temporarily extends the following through the end of 2016:
    Biodiesel tax credit
    Deduction for certain tuition and higher education expenses
    Indian employment tax credit
    Stops Obamacare’s medical device tax from taking effect (extended through 2017)
    Leaving what you earn in your wallet is essential to growing a healthy and sustainable economy. If you are interested in learning more about any of these provisions, please click here.

    Stay safe this holiday season!

    All the best,

    Kristi

  21. mike from iowa

    Protecting Americans from common sense solutions sounds better. Can’t pay the bills w/o taxes. Cutting welfare isn’t going to do it. Sounds like a broken record.