Republicans Turn SB 106 into Credit Reduction to Grab More from Retailers

House Appropriations chair Representative David Anderson grabbed Senate Bill 106 this morning and stuffed that last empty carcass bill with a tax increase.

Now the Republicans who voted for Anderson’s hoghouse amendment are going to argue hard that SB 106 is not a tax increase but simply a credit reduction. Let’s see what you think:

Right now, retailers get to keep a little bit of their sales tax as compensation for the work they do collecting that money from us customers and sending it to Pierre. The collection credit is 1.5% of the monthly sales tax collected or $70 each month, whichever is less.

The Anderson amendment revises that credit to 1.4% of monthly collections or $65, whichever is less.

Appropriators guess the collection credit is worth five million dollars in revenue the state leaves on the table.*

Hmmmm… SB 106 means retailers keep less money and send more tax dollars to the state. Practically, the reduction of that credit is an increase in taxes paid, right?

Retailers’ lobbyist Bill Van Camp doesn’t care what we call it; he doesn’t want it. Van Camp got a copy of the Anderson amendment about twenty minutes before it was presented (which was twenty minutes before pretty much anybody else in South Dakota got to see it) and ran over to House State Affairs to say wait a minute! Van Camp noted that the retailers had held off on asking for an increase in their collection credit in Senate Bill 36 as a fair trade-off for allowing that bill to move the collection date a few days earlier. He said the Retailers had stood down in polite recognition of the state’s tight budget situation. He said the Retailers object to resurrecting this issue and reducing their collection credit.

Speaker G. Mark Mickelson indicated this credit reduction/tax increase is just a vehicle to get overhauled in conference committee to balance the budget and protect the expected 0.3% K-12 funding increase, Medicaid provider payments, and the Build South Dakota fund. Ten Republicans held their noses and voted for the Anderson amendment to SB 106. Republican Isaac Latterell joined Democrats Julie Bartling and Spence Hawley in voting nay.

Senate Bill 106 now rolls like a fiscal grenade to the House floor, just waiting to blow up in the face of legislators who try (like Al Novstrup earlier this year) who try to undo the tax break with which they bought Retailers’ support for last year’s sales tax increase.

Correction 2017.03.07 07:28 CST: My original report said the proposed tenth-percent reduction of the credit was worth $5 million. I regret the error.

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  1. Low information guy Mickelson says they need to shore up Medicaid provider payments, geesh, where has this bozohead been? Get a clue, Medicaid Expansion and you guys will be able to pack your six shooters in the hog house with smiles on your mugs. We have a swamp just like Washington, it is right next door to the capital building, full of dumb crooked republican ideas and goose doo doo.

  2. I didn’t realize this was a thing. Do most states do this? Correct my math, but wouldn’t the state have an additional $ 70 million dollars for its coffers if it got rid of this credit? That $ 70 million could have almost paid for last years teacher pay increase without an increase in the sales tax. Else, when is the “House of Lords” legislature going to pass a bill to give the average citizen a credit for any costs involved in paying their property taxes and or vehicle licensing fees?

  3. John KC, your math looks right to me. Maybe that’s the existing money the opponents of last year’s sales tax increase were talking about.

    Jerry, yes, the SDGOP’s concern about Medicaid seems selective.

  4. Whoops! I misread Mercer’s report: the entire collection credit is worth $5 million, so cutting the credit by a tenth of a percentage point would yield less than half a million dollars. That seems small potatoes toward balancing the budget. I’ll correct the above text to reflect those figures.

  5. This credit was just a giveaway to begin with. Retailers should consider the act of collecting and remitting sales tax to the state to be one of the basic requirements for doing business in SD. The state ought to eliminate this credit altogether and recoup the $5 million a year to use for K-12 education.

  6. Not only is this credit a giveaway, it hasn’t been around that long in comparison to SD’s long reliance on sales taxes. The credit has only been around for 10 years. Before that, retailers collected and remitted sales tax as part of their civic duty and attributed it to the cost of doing business in SD, as they will again when this credit goes away in support of the greater public good.

  7. Hang on, Ror: Speaker Mickelson said his dad implemented the credit in 1990.

    But the broader point is well taken: we had sales tax for a long time and offered to collection credit. Even now, not every sales tax collector gets the credit, right?

  8. Speaker Mickelson is mistaken. The collection credit is a much more recent invention. Look at the statutes in SB 106. Pull them up and see they are new statutes from 10 years ago.

  9. You’re both correct – at least in part. In essence, it’s a rebate to retailers who serve as the state’s tax collectors. Mickelson did get it through the legislature the first time. Janklow got it repealed as part of paying for property tax relief. Once Janklow was gone, the Retailers mustered enough support to override Rounds’ veto – in 2006 (I think).

  10. There’s probably a lot of French Math swirling around on this thing. I bet you the tenth of a percent is worth only a couple hundred thousand dollars. Enough to give every good teacher in South Dakota a free sandwich on the second Tuesday in February.

  11. Tired and baseless critique, Grudz: you often throw it but rarely make the effort to justify it. Very Trumpy. Stop betting and start analyzing and proving.

    Curt, that makes sense and fits with what Speaker Mickelson said in committee. But either way, Ror is right that the collection credit is a relatively new and curious development.

    The IRS doesn’t pay me a credit for filing my 1040 and sending my quarterly checks.