DFP Bill #4: Implementing a South Dakota Personal Income Tax

Dakota Free Press
Legislative Proposals

Dakota Free Press readers want tax reform, and one key plank of that reform is adding a state income tax to more fairly and effectively tap the wealth available in this state to support public works. South Dakota taxes the income of banks and financial corporations with no destructive impact on the money-moving industry; here’s a proposal to tax personal income as well.

Dakota Free Press Bill #4: Creating a State Tax on Personal Income 

FOR AN ACT ENTITLED, An Act to collect tax on personal income.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:

Section 1: Every South Dakotan required to file a federal income tax return shall file a state income tax return with the Department of Revenue by same deadline established by the IRS for federal returns.

Section 2: The South Dakota income tax exemption is defined as the sum of the federal personal exemptions and the standard deduction that each taxpayer is eligible to claim on his or her federal income tax return for each tax year.

Section 3: Taxable income is defined as the each taxpayer’s total income, as reported on the taxpayer’s federal tax return, minus the South Dakota income tax exemption.

Section 4: Each person filing a South Dakota income tax return shall pay 0.6% tax (six dollars per one thousand dollars in income) on the first $100,000 of taxable income.

Section 5: Each person filing a South Dakota income tax return shall 6% tax (six dollars per one hundred dollars in income) on any amount of taxable income above $100,000.

Section 6: The Department of Revenue shall promulgate rules for the collection of the state personal income tax and penalties for failure to pay.

Section 7: The Department of Revenue shall make paper and electronic state income tax return forms available free of charge to all South Dakota taxpayers.

Section 8: The Department of Revenue shall create a secure online system through which all South Dakota taxpayers may file their state income tax returns and pay their state income tax without additional charge.

Based on recent income figures and calculations from my Sixer-Surtax proposal, I wildly guess this personal income tax could generate $230 million. Again, I invite your amendments, points of oppositions, and suggestions on whether the money raised should go toward additional state spending or reduction of other taxes.


11 Responses to DFP Bill #4: Implementing a South Dakota Personal Income Tax

  1. DFP bills 3 & 4 need to be consolidated into one big reform package that also contains a mechanism that will allow the counties to provide real estate tax relief and still maintain their schools and roads. DFP 4 does demonstrate just how easily and efficiently a state income tax could be administered; but without a complete reform package I think it will be very hard for it to grow “legs” and go anywhere.

  2. Richard Schriever

    Need to have more “steps” or “brackets” in graduating income levels for corr. with tax %. For ex: $99.999K (1%), $$100K -> $250K (1.8%), $250K -> $499.999K(3.2%), and + $500K (6%). Also need to stipulate that first $50K charged at .6% (for everyone), 50-100 @ 1%, etc. Effective rates would be .6%. .8%, 1.4%, 2.3% and 4% + up to possibly 5.8%??

  3. If a state income tax would be implemented, then tax on food and clothing should be removed. It’s a tough thing to balance and maybe can never be balanced. The corporates or private farms/ranches or business can re-invest in their private businesses and write much of their costs off; depreciate out assets as deductions and buy things, things related to their business, to off-set their incomes at the end of the year to avoid high levels of taxation. The single “laborer” does not have those types of tax breaks. Obviously, persons pay personal property taxes if they own a business or property. Secondly, years ago, when we implemented the gambling, we were told that money would go to education; so the state of SD passed the bill for gambling in the state. Now the money goes into the general fund as I understand it. Where does that revenue go? Obviously, not to fund education.

  4. Roger Elgersma

    To be fair to all we need to have both income tax and corporate tax added at the same time. Some graduated thing like mentioned above. But to add to the fairness and so it is not just some huge tax increase we also need to drop the tax on food and medicine and take one percent off of the sales tax. This would be a tax change rather than just an increase. The change could be mostly neutral with a little extra for education.

  5. Porter Lansing

    This could be a nice addendum to the bill, also. Hillary today proposed a new 4% surtax on the highest earning Americans that would raise $150 billion over a decade. This is building on the Buffett Rule that seeks to ensure that the middle-class doesn’t pay a higher tax rate that the top earners.

  6. mike from iowa

    Porter,you need to try wingnut math,inspired by god. Pastor Craig Conner of Panama City,Florida says if we defund Planned Parenthood we could pay of 18 trillion dollar national debt immediately. Silly me-I wasn’t aware the treasury was open 24/7.

  7. Hillary seeks to raise 150Bil over a decade, Porter? That’s ten years! The Fed was throwing 75Bil a month in quantative easing. She is flipping numbers for incompetent voters to hang a hat on. Isn’t she also the one who was against derivatives after she was for them? And against Iraq and Afghanistan wars after she was for them? Where does the carnival shell game ever end with the Clintons?

  8. MK, Roger, would we increase the chances for passage of tax reform if we combined DFP Bills 3, 4, and 5 into one tax omnibus bill? Would we be able to tackle sales tax and income tax (and maybe even some property tax relief) all in one bill under the constitutional requirement that each bill address only one topic?

    I do agree that it makes sense to do these reforms in combination. We should not raise sales tax or implement new taxes without at least considering lowering other taxes.

    Tax reform has two goals: capture more revenue for unfunded needs, and make the tax system more fair. If we did some combination of DFP Bills 3–5 that didn’t increase total state revenues one penny but still rearranged the tax burden more fairly, we’d still have a plan worth doing.

  9. Douglas Wiken

    Not taxing fuel only reduces odds we will move to non-fossil fuel environmentally safer heating systems.

    I can see greed in city people wanting to make sure farmers pay taxes on things city people never need to buy, but that does not make it good tax policy.

    I see the benefits of not taxing food every time I guy groceries and it would simply be less regressive which is also good. But I would suggest we leave those sales taxes in place and let the income tax start at $50,000 at 6% and stay at that rate until about $200,000 and then increase it to 10% from there on. I think all people should support education in some way. For many low-income people who may also have a half dozen kids, no tax on food would mean they pay nothing to support the schools they load up. A corporate tax makes sense because we do not get any price breaks from corporations just because SD has no corporate taxes. When we buy from them at the same price those in states with a corporate income tax pay, we effectively subsidize residents of other states.

    Any reform of tax systems should also consider who or what generates government expense and whether it is an unnecessary expense or a legitimate expense. An easy example is why doesn’t a tax on ammunition pay for traffic signs shot up by vandals and slob hunters instead of people who buy gasoline.

  10. Porter Lansing

    PS … If South Dakota votes blue, the Vikings will win.

  11. Got that right, Porter. Who do you need, to win in SD? How about bringing Fran Tarkington out of retirement.? Or maybe a Herseth?