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Daugaard Prefers Food Stamps to Cutting Food Tax

Governor Dennis Daugaard just made an interesting argument on SDPB Dakota Midday in the debate between the competing proposals for raising sales tax to raise teacher pay in South Dakota. Governor Daugaard proposes adding a half percentage point to the state sales tax and giving $40 million in property tax relief. Democratic legislators propose adding a full percentage point to the state sales tax but offsetting nearly $100 million of that increase by exempting food from sales tax.

On Dakota Midday, Governor Daugaard rejected the idea of repealing the food tax. Low-income people already get food stamps, said the Governor, and thus don’t need more help buying food. Food stamps are a more targeted solution toward relieving the poor of unfair tax burdens. As it stands, said the Governor, most people paying sales tax on food (“like me,” he said) are perfectly capable of paying sales tax on food. Exempting food from sales tax is too blunt an instrument for providing tax relief to those who really need it.

The Governor offers an interesting policy argument for targeted tax relief for the poor. It sure beats the pants off the arguments we usually hear from pro-corporate Republicans (and this week, the Aberdeen City Council) for targeted tax relief for the rich. I agree with the Governor that, in general , tax relief should not go to people like him and rich French cheesemakers and billionaire trust-fund schemers who are perfectly capable of paying taxes.

But that a Republican governor would say that a federal welfare program is better policy than a tax break enjoyed by every citizen, including rich guys making peanut butter sandwiches, makes me wonder if Dennis Daugaard hasn’t been body-snatched and replaced with Dennis Kucinich. (Expand Medicaid, pay teachers more, and now yay food stamps? Tony, go get a blood sample from the boss!)

Besides, the point of exempting food from sales tax isn’t just to provide direct relief to the poor who make 130% or less of the poverty level. The point of exempting food from sales tax is to temper the regressivity of sales tax for consumers at all income levels in the simplest way possible. You can try to target refunds to low-income folks—South Dakota tried that for a few years, then repealed the program—but then, just like Food Stamps, people have to apply, the state has to hire bureaucrats, and some people don’t get the relief we think they deserves. Exempting food from sales tax guarantees that everyone who buys food gets that tax break. Sure, Dirt-Poor Joe and Middle-Class Mom and Dennis Daugaard and Denny Sanford all get the same two-dollar tax break on their sacks of groceries. But they get that break every time they buy groceries, and that two dollars means a while lot more to Dirt-Poor Joe and somewhat more to Middle-Class Mom than it does to Dennis or Denny. That’s how relief from regressive taxes works: we spread the benefits throughout the system, not just to the lowest income bracket.

Sales tax is regressive. Repealing the food tax would make South Dakota’s sales tax less regressive. I know the Governor prefers to rely on the federal government to provide equity for lower-income South Dakotans, but adopting the Democratic plan to raise the state sales tax to 5% while exempting food from that tax would be a nicely self-reliant way to make South Dakota’s fiscal policies fairer.


  1. Madman 2016-01-13 15:33

    So Daugaard is good with a program that most Republicans in the state have used as a war cry for the past couple of decades. Of course he is good with a program that is supported by federal tax dollars and splits the cost of administration 50/50ish.

    So if Noem, Thune and Rounds are actually supporting SD and if the governor of the state says this is best for the people of the state, then I expect to see all three of them voting for the program from here on out.

  2. Porter Lansing 2016-01-13 15:46

    Pretty shifty, Governor
    People who no longer qualify don’t suddenly become wealthy. Any extra cost on a bag of baby food is still an unnecessary burden.
    – Seventy-four percent of those participating in the program receive food stamps for two years or less. Half of all new recipients stay on the program no more than ten months and 57 percent end participation within one year.

  3. caheidelberger Post author | 2016-01-13 16:29

    Exactly, Porter: there are plenty of people between poverty line and stinking rich who can use a break on the food tax. And not everyone in poverty (or, more accurately, per the federal guidelines, earning 130% or less of the poverty line each month) is on food stamps.

    And Madman, yes, the parallel between the Governor’s statement today about food stamps and his current position on Medicaid expansion is remarkable. In each case, he is pointing toward a federal program that Republicans demonize and try to repeal but which covers social costs in South Dakota with federal dollars. Is Daugaard leading Republicans into an identity crisis?

  4. Richard Schriever 2016-01-13 17:06

    Do a google search on this phrase and see what the resulting MAP looks like. “Per Capita Federal Spending by County”. Then let’s talk about targeting Federal “relief” programs.

    (PS – if I could, I’d post the map here)

  5. Porter Lansing 2016-01-13 17:28

    The Governors response to eliminating sales tax on food is a textbook example of negativity bias and wealthy privilege. He immediately said no to a new idea that helps the less fortunate but when a proposal arises that benefits the wealthy, that idea gets plenty of thought.

  6. Robin Page 2016-01-13 18:09

    Who cares about the PEOPLE of South Dakota? Not Governor Daugaard! More and more states have removed their taxes on food. South Dakota should do the same. GDD ignores the “lower-income” people like our senior citizens, veterans, and the disabled who may have just a bit too much income to qualify for “food stamps”, but still struggle with buying food or medications. South Dakota can’t balance it’s budget without federal program dollars.

  7. C Brechtelsbauer 2016-01-13 19:07

    The irony is that the governor’s plan includes property tax relief, using enough funds that it could instead drop the state’s portion of food tax down to 2%.
    As currently done in SD, property tax relief provides far more benefit to folks with high value homes, who probably don’t need the “relief”, than to the average Joe. A few years ago, I compared some homes in SF and did the figuring. I could show you a home with a $330. benefit and another with a $3400. benefit. That’s every year! Most people do not realize how much they benefit.
    Making the inequality worse, renters, as lots of low-income people are, get no benefit at all. They are paying, through their rents, a much higher tax rate than home owners.

  8. Porter Lansing 2016-01-13 19:56

    Good one, CB.

  9. D Gill 2016-01-13 20:24

    I thought food purchased with state benefits weren’t taxable anyway so either way low income people don’t pay those taxes. As one of the “working poor”
    Don’t qualify for any kind of benefits but don’t make enough to be considered wealthy I would love a tax break on food. Especially because the healthy food is expensive.

  10. caheidelberger Post author | 2016-01-14 05:54

    Hang on, Porter: on face, the Governor sounds like he’s saying he doesn’t like the food exemption specifically because it benefits rich guys like him instead of targeting folks who really need the help. The real problem is that his argument could just as easily sink his own policy proposal. As CBrecht points out, the $40 million in property tax relief he wants to dole out provides far more benefit to folks with expensive homes.

  11. Porter Lansing 2016-01-14 06:08

    There seems to be a kabal that have power in Pierre, funded by Americans for Prosperity (Koch Bros.) that are opposed to any progress no matter what the Governor suggests. Is the Gov just pandering the left? Even on Medicaid.

  12. caheidelberger Post author | 2016-01-14 06:23

    I can’t imagine why Daugaard would pander to a Left that his party insists is either marginalized or non-existent in South Dakota. He could be firewalling the Left: he may recognize that teacher pay, Medicaid expansion, and corruption are potent issues that smart Dems could use to erode the R brand and win the vast middle. He may be offering these plans to protect himself and legislators from accusations of inaction. Do just enough, and voters will stick with the R brand.

    Of course, he may also be proposing these measures because he finally recognizes there are problems that must be solved and enormous benefits that could accrue to the state.

  13. Porter Lansing 2016-01-14 07:19

    Firewalling? I like that term. That’s what he seems to be doing. The Schoenbeck kabal may be prepping Lee for a run. Sad day for Watertown if he becomes Governor.

  14. leslie 2016-01-14 08:08

    How bad is he Porter? I barely know him.

  15. Porter Lansing 2016-01-14 08:19

    I don’t see a public blog as a respectful place to denigrate an opposition candidate when they’re not here to defend themselves. Public debates are a better venue.
    ~The most valued entity in politics are the “high value” voters. i.e. Voters who haven’t yet made up their mind. Statistics show most high value voters don’t even engage until a few weeks prior to election. Political aficionados often view the electorate as more involved than they really are.

  16. Craig 2016-01-14 08:55

    Just a point of clarification. Any attempt to repeal sales taxes on food must include a statement that it only applies to unprepared food. Prepared food (the kind you buy at Minverva’s in Sioux Falls or that pizza you ordered from Dominos) should continue to be taxed. This targets the tax relief towards those who have the most benefit because those who are nearest the poverty level are not often found ordering their meals at Applebees nearly as often as the middle and upper classes.

    Otherwise if you remove all sales taxes on all food, the majority of the benefit continues to be directed at those with the most income, because they are more likely to spend much more on food throughout the month due to the increased probability of dining out as well as the actual food purchased. Whereas someone of limited means might spend more on rice, beans, and canned soup, someone with a six or seven figure annual income is a lot more likely to be purchasing steak or seafood.

    One added clause I’d like to see would be that we continue to tax soft drinks, energy drinks, coffee and candy etc. We shouldn’t subsidize these items via lower tax rates knowing they can and do contribute to conditions such as obesity and diabetes. I’m all for someone having the right to buy what they want, but they shouldn’t get a tax break for making poor decisions either.

  17. caheidelberger Post author | 2016-01-14 09:38

    What are you talking about, Porter? Schoenbeck reads this blog. He even comments. Don’t get personal, focus on voting record and policies, but fire away.

    Craig, I concur with your amendment. If you can afford to eat out, you can afford to pay sales tax. Keep the sales tax on restaurant food, cut it on groceries.

    It’s worth noting that the current SD statutory definition of food excludes alcoholic beverages, tobacco, and prepared food (see SDCL 10-45-1). The same statute defines prepared food as “any food sold in a heated state or heated by the seller; two or more food ingredients mixed or combined by the seller for sale as a single item; or food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food.”

    That includes the $5 pizza at Little Caesar’s, which is a heck of a deal for a working family, cheaper than the ingredients and time for a lot of sit-down home-cooked meals. But one can pick up a frozen DiGiorno’s pizza for about the same price, or an even bigger Wild Mike’s pizza at Walmart for just a little more and feed the family.

  18. Porter Lansing 2016-01-14 11:16

    Thank-you for the offer. It’s better head to head. Many will agree I don’t know what I’m talking about BUT one thing I do know is who I’m talking to and why I’m talking to them. It’s not only The Schoenbeck, Jackley, Hinkley and Deutsch Contrived Christian Cartel but most of the right wing reads this blog. But why wouldn’t you? Their blog is a bit unvaried and platitudinous.

  19. Douglas Wiken 2016-01-14 11:57

    Craig is on the right track with cutting sales tax on basic foods. Limit the cuts to raw vegetables, flour, bread, sugar, raw meat, raw fish, raw chicken, etc.

  20. Wayne B. 2016-01-14 12:06

    One important aspect to Daugaard’s favor of keeping food taxed in SD is the budgetary stability it provides our state government. The argument he made is if we decouple our taxation from the steady drivers (and keep the overall tax burden low), then the state budget becomes subject to the wild swings we’ve seen in other states. With that volatility comes the challenge of trying to significantly constrain government spending in lean times and expand smartly in times aplenty.

  21. bearcreekbat 2016-01-14 12:28

    I wonder what percentage of homeless people have kitchens available to prepare raw food for meals.

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