The South Dakota Budget and Policy Institute surges into the teacher-pay-raise debate with a great analysis of the competing sales tax proposals. Both proposals, Republican Governor Dennis Daugaard’s half-penny sales tax and the Democrats’ full-penny with 0% on food, are regressive taxes, but SDBPI’s Joy Smolnisky agrees with me that the Democrats’ proposal is less regressive because the bottom 20% of households by income would pay a lower share of their income under the Democrats’ plan than they would under the Governor’s plan:
Pass the Democrats’ plan, and the poorest 20% of households in South Dakota will pay a third less in increased sales tax than they will under the Governor’s plan. The next 75% of households will pay about the same amount under either plan. Only the richest 5% of households pay substantially more under the Democrats’ plan. The extra hit under the Democratic plan for the wealthy folks in the 95%–99% slot is 8%. The infamous 1% pay 50%, $489, more under the Democratic plan.
Read that again: pass the Democratic plan, and 95% of South Dakota households pay about the same increase as or, where it matters most, among the poor, a smaller increase than the Governor would impose. And we pay teachers a higher wage—median in the region, not the bottom!—without having fire 400 teachers to reach our salary goal.
Overall, the Democratic plan raises $128 million compared to the Governor’s $107 million (and remember, the Governor hands $40 million of his revenue back to property owners as property tax relief, further increasing the net regressivity of his plan and decreasing the revenue available for education). Amazingly, the Democratic plan actually collects a few hundred thousand dollars less from South Dakotans than the Governor’s plan. The Democrats recoup that difference and goo-gobs more by capturing visitor cash:
Democrats charge us a little less and soak visitors for 87% more. If our legislators look at the numbers, they won’t shout, “No Taxation Without Representation!” They’ll realize they have an opportunity to pay teachers a whole lot more, tax South Dakotans a few hairs less than the Governor is asking, and take much better advantage of revenue from people who won’t be around to vote against them in November… all by dumping the Governor’s plan and voting for the superior Democratic plan.
And with that, as of 14:18 CST today, the House is in session and will debate the Governor’s plan, HB 1182, sometime this afternoon. Watch live on SDPB’s video feed [Update: video is archived below; debate on HB 1182 starts around 42:50]: