The Dakota Free Press readers poll revealed a keen interest in tax reform. So let’s take a stab at making our state sales tax simpler by removing a lot of the exemptions we offer.
The state leaves $990 million in tax expenditures on the table, mostly in the form of sales tax exemptions. For the third DFP legislative proposal, I leave the tax expenditures for government purchases, civic and nonprofit association events, and library copying intact but give the rest of the exemptions the axe, adding around $800 million to state coffers.
In exchange, I propose eliminating the sales tax on food and clothing. I invite the Legislative Research Council to run its own fiscal impact analysis, but by mashing some stats together, I figure giving up the food and clothing tax costs us about $170 million. The net fiscal impact of this bill should be to put about $630 million more in the state general fund, an amount equivalent to 42% of the general fund spending recommended by Governor Daugaard in FY2017.
Money like that creates three possibilities:
- Go back through the exemptions this bill repeals and choose some to keep on the basis of benefits for certain industries and institutions.
- Provide additional tax relief by lowering the state sales tax on all goods from 4% to a level that would maintain current revenues.
- Find something to do with all that money (remember: expanding Medicaid and raising teacher pay to Blue Ribbon levels takes $132 million, leaving nearly half a billion to invest in other priorities).
Dakota Free Press Bill #3: Repealing $800 Million in Tax Expenditures and Repealing Sales Tax on Food and Clothing
FOR AN ACT ENTITLED, An Act to eliminate most tax expenditures in exchange for eliminating the tax on food and clothing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1: That § 10-43-5, 10-44-4, 10-44-8, 10-45-3.4, 10-45-5, 10-45-5.2, 10-45-5.5, 10-45-7, 10-45-7.1, 10-45-9.1, 10-45-11.1, 10-45-12.1, 10-45-12.4, 10-45-12.5, 10-45-12.6, 10-45-12.7, 10-45-13.1, 10-45-13.5, 10-45-14, 10-45-14.2, 10-45-14.4, 10-45-14.6, 10-45-14.9, 10-45-14.10, 10-45-14.11, 10-45-14.12, 10-45-15, 10-45-16, 10-45-16.1, 10-45-16.2, 10-45-16.3, 10-45-18, 10-45-18.1, 10-45-18.2, 10-45-18.3, 10-45-18.4, 10-45-18.5, 10-45-18.6, 10-45-19, 10-45-19.1, 10-45-20.5, 10-45-20.6, 10-45-27.2, 10-45-29.1, 10-45-68, 10-45-84, 10-45-90, 10-45-92, 10-45-93, 10-45-94, 10-45-96, 10-45-110, 10-46-2.1, 10-46-2.5, 10-46-3, 10-46-5, 10-46-6.2, 10-46-9.1, 10-46-9.2, 10-46-9.3, 10-46-9.5, 10-46-9.6, 10-46-16, 10-46-16.1, 10-46-16.2, 10-46-16.4, 10-46-16.5, 10-46-16.6, 10-46-17, 10-46-17.2, 10-46-17.3, 10-46-17.5, 10-46-56, 10-46-63, 10-46-68, and 10-50-18 be repealed.
Section 2: That chapter 10-45 be amended by adding thereto a NEW SECTION to read as follows:
There is imposed a tax of zero percent on the gross receipts from the sale of food as defined in § 10-45-1 and clothing.
Amendments? Complaints? Fears that cutting these sales tax exemptions will crush business? Fire away… and remember, if you don’t like this bill, we have two more reader-inspired tax reform bills coming!