The District 1 delegation offered Aberdeen residents their first Legislative crackerbarrel of the year at a “Front Porch Conversation” hosted by the Brown County Democrats on Thursday, February 11. Among the informative and newsworthy comments offered was Senator Jason Frerichs’s (D-1/Wilmot) statement that he hopes to amend House Bill 1182, the Governor’s funding mechanism for the Blue Ribbon teacher pay raises, to shield farm machinery from the proposed sales tax increase.
HB 1182 increases the state sales tax from 4% to 4.5%. But Section 15 of the bill also reaches out to raise by a half-percentage point the excise tax on “the sale, resale, or lease of farm machinery, attachment units, and irrigation equipment used exclusively for agricultural purposes.” Senator Frerichs said Thursday that HB 1182 asks for “serious money” ($500 more) from a farmer buying a $100,000 tractor.
Senator Frerichs said he asked gubernatorial chief of staff Tony Venhuizen about giving farmers some relief in HB 1182. The Senator says the chief of staff responded that the excise tax hike will whack farmers for $3.5 million in exchange for $7 million property relief.
Perhaps Senator Frerichs remembered the numbers from his conversation backwards, but the South Dakota Budget and Policy Institute indicates that farmers, like pretty much everyone else, will pay more in taxes to raise South Dakota’s teacher pay out of the gutter to regionally almost-competitive rates. HB 1182 offers property tax relief of about $20 on every $100K of ag land. Thus, the only farmers who might come out ahead on HB 1182 are those who own a whole lot of land and buy darned little equipment.
Typical! Come up with a plan and have everyone attach their exemption. Pretty soon you don’t have a plan, just a bunch of exemptions!
Oh, I get it. Democrats want others to pay for a teacher pay raise. No wonder they are always in favor of tax increases.
Not Democrats, Spencer. Farmers.
If Sen. Frerichs has his numbers right then it looks like farmers are coming out money ahead already, and they are whining that they don’t come out even farther ahead.
Regardless of the numbers pertaining to farmers, why shouldn’t farmers pay a higher sales tax like everyone else?
Counties should be able to tax these behemoths to pay for the roads and bridges they destroy.
Spencer,
To refresh memory, this NOT a Democratic tax increase, It is a Blue Ribbon Panel and Daugaard tax increase.
Corey, would it be possible for you to publish a list of all the items that are currently tax exempt in South Dakota? I believe a lot of folks would be surprised at how extensive it is, and who some of the big benefactors are. Thank you
It seems to me that farmers aren’t the only ones with business expenses and their kids go to school too!
Oh Spencer…. you poor thing. You might want to actually pay attention before going on another rant, because A) this tax increase is a Republican proposal, and B) it would impact everyone (including Democrats) who buys things in our state.
Thus you are either ignorant of the facts, or you are purposefully trolling. Which is it?
Like I have posted on here before, with all deference to Grudznick, sales tax is unfair to renters and the poor because renters and their landlords don’t get the tax breaks on their property like homeowners and farmers do. Plus they are not building up equity the way that homeowners and farmers are.
The poor have to pay 6% on their food unlike all neighboring states and all but 14 other states. While sales tax on new cars and trucks is at 4% and ALL neighboring states are higher. Advertising is untaxed in SD, you are welcome major media and Laurence and Schiller.
Can do, Bill K.:
Here’s the Bureau of Finance and Management’s full list of $990 million worth of “tax expenditures,” including all those tasty sales tax exemptions.
You can review Dakota Free Press Bill #2016-3, which provides links to the statutes that authorize those exemptions.
You can also review my December 9, 2015, post in which I calculate that we could fund both the Blue Ribbon teacher pay increase and Medicaid expansion by closing 13% of our state tax breaks.
Lanny and Roger have aptly responded to Spencer’s attempt to partisan-ize this question. I will further note that the proposal is not a Democratic Party proposal, but a proposal from one legislator. I have not heard the Democratic caucus as a whole endorse this proposal or the GOP caucus as a whole reject it. I share Loren and Rorschach’s doubts about why farmers buying equipment deserve a break that other consumers do not. Isn’t an excise tax increase just their fair share of the burden for pulling teacher pay out of the ditch?
For those of us that live in Rapid City, our sales and city taxes will be 6.5% that applies to all of us.
No one should get an exemption to this new tax increase, didn’t the farmers clean up pretty good on the Farm Bill passed last year? How much more do they want?
I agree with Roger. Farmers shouldn’t be exempted.
I’ve never met a poor farmer in the modern world. They are the shining example of socialized risk and privatized profits. In good years and bad, the taxpayers lose and they either come out even or ahead.
Senator Frerichs is a fool for asking for an ag exemption. As a farmer I would expect to pay my share of the new tax to solve an old problem of low teacher pay. My message to Senator Frerichs is to leave it alone and quit making farmers look bad. This is your party’s play, leave it alone.
Farmers should not be exempted, even if Mr. Frerichs is the leader of the Democrats and a farmer.
Greg I applaud you. Thank you.
My Representative is Kent Peterson and he is a farmer. At a Cracker Barrel this past Saturday Peterson said he was going to vote for the Governor’s plan but like Frerichs he wasn’t for the tax on farm equipment. I had a problem with that, but he is going to vote for the tax increase.
The low commodity prices in the 80s and 90s took out a large number of smaller,poor farmers. The big guys consolidated and incorporated when prices rose in the first decade of this century. Now,with land and commodity prices dipping again,we’ll see if these big guys can hang on. Many are over-extended on land and equipment buys.One thing you will never see is the price of seed corn and beans go down with the market. It doesn’t happen.
I read HB1182 and see nothing about property tax relief and nothing about increasing teacher pay:
http://legis.sd.gov/Legislative_Session/Bills/Bill.aspx?File=HB1182P.htm&Session=2016
I grew up on a farm and married a farmer, yet I don’t think farmers should be exempt. If a farmer can afford to buy or get a loan on a $100,000 tractor, they certainly ought to be able to come up with another $500 in taxes.
I am very disappointed in Jason. It appears he is only looking out for his own interests. If you are going to be a leader you need to support decisions that cost you personally. Apparently Jason doesn’t believe the sales tax is needed.
I thought of him at one time as a future governor , however his actions the last few years make me question that thought
Steve Sibson, First line on the bill: FOR AN ACT ENTITLED, An Act to increase the state sales tax, the state use tax, the excise tax on farm machinery, and amusement device tax for the purpose of increasing education funding and reducing property taxes, and to declare an emergency.
Mr. Frerichs, stand up and lead your Democrats and tell them that “farmers and not other special interest group should be exempt.” Say that out loud, to the news papers Mr. Frerichs. Say it in your caucuses and on the floor of the legislatures. Say it in the hallways and say it loudly so all around you can hear.
Farmers should not be exempt.
Curious whether Senator Frehrichs will be taking advantage of cannabis reform in the farm bill and dare to be revolutionary.
one for 1 thing he’d have to move here and 2 if he ran for the state senate rumor has it he’d have to run against a certain former U.S, candidate.
District 19: the district that wastes its representation in the legislatures by electing the most ineffective persons possible, even more so than districts 30 and 28
Mr. Stricherz, I have to agree with Mr. Sibby. That line of the bill says to increase funding to education. It could mean building more football fields or padding the pockets of fatcat administrators. It does not say “paying good teachers more money.”
This lays it out there pretty simply: http://www.sdbpi.org/hb1182-raising-teacher-salaries-how-much-would-taxes-change-for-your-agricultural-operation
Lanny, read the bill. The content does not match up to the title. The money is going into the general fund along with the 4% we have had for decades. The crony capitalists are using teachers as political pawns to line their pockets some more. You folks are lacking discernment.
Sibby are you running as an Independent?
Greg, Owen, couldn’t we all say the same thing as Frerichs and Peterson—”I’ll vote for HB 1182, but I don’t like the ___ tax”? Isn’t that what I’ve been saying all along about relying a regressive tax to fund this necessary plan? Sure, I’ve also said let’s vote for the Dems’ plan first, since it’s a superior plan, but let’s not go asking for exemptions for any special interest. As Loren said at the top, we can’t start handing out exemptions. Everyone has to pay for this plan.
But might Jason have an argument? Is there any way we could argue that the ag machinery tax is a double dip on farmers who are already paying sales tax on everything else they buy, just like the rest of us? Or is that just the price of doing business? Other industries are paying increased sales tax on all the equipment they are buying, aren’t they?
Sibby has a point. By introducing his Blue Ribbon plan in three parts, the Governor gives room for mugwumps like Sibby and Stalzer to cry, “Oh, HB 1182 is just a tax increase! It doesn’t put theb money toward education or property tax relief!” We have to go look at (and pass!) SB 131 and SB 133 to get the full education package, and then we have to pass some other bill (is there one?) to enact the property tax relief.
That’s another reason the Democrats’ bill is better. SB 151 does everything necessary in one bill: raises sales tax to 5%, drops food tax to 0%, and increases the per-student allocation by 19%, pretty much making up for the neglect by Rounds and Daugaard. Oh, and SB 151 doesn’t increase the ag machinery excise tax. Strangely, Senator Frerichs is not a sponsor.
SB 151 does it all in one honest package, Sibby. One vote does the job. Willing to back it instead of HB 1182?
And Lanny, Sibby is right about the title. Legislators can write anything they want in the title, but without enacting clauses below, it’s just fluff. It’s like HB 1107: Rep. Rev. Craig can say its about stopping government discrimination, but it’s really about giving religious zealots a free pass to discriminate against people whose sexual activity and identity they don’t like. We need clauses in the bill that say “Do X”. A title by itself is nothing, as we see in hoghouse vehicle bills.
Cory, re a potential special rule for farm equipment: Remember all those sales tax exemptions someone has been fussing about? Those easy plums for the picking if someone would just have the gumption to stand up and yell “enough!?” I thought it was you; maybe I’m mistaken. Millions and millions of dollars of exemptions: Well, MANY of the dollars are in ag exemptions. Bad bad illogical unfair exemptions? No! Tax technicians have spent decades parsing the difference between sales to the final consumer and resale items NOT subject to sales tax because they are used UP in the production of a product. Accountants learn the principal in first grade. The general rule has been that items used UP in producing a product (and I haven’t consulted a text lately to get this def) are exempt from sales tax, while items used IN production are not. Feed and seed and chemicals and grain and livestock are turned into food. Only the food is subject to sales tax; not all those inputs. Farm equipment and tools and building materials for repair shops are used IN the production of food, but they don’t disappear into the food. They ARE subject to sales tax. The engineering and legal professions feel persecuted because the definitions aren’t so easy there and they end up with some double tax on inputs, but generally, we’ve been successful in maintaining that consistent exemption principal, other than THE biggie of advertising, (VERY difficult to administer collection of) and mutual insurance companies, whose customers don’t have to pay the same state tax that other insurance customers do, because they’re such good citizens. Anyway, exempting farm equipment from the increase would not be consistent with the principals used to date in administering the sales tax, but when put into the sausage blender with property taxes and the current exemption for farm repairs that was arrived at a few years in a swap for pulling the rate on farm equipment up from the old 3% to 4%, who’s to say?
why isn’t this woman our governor? she did her part. why didn’t we??? will rogers said we deserve who we vote in. this batch of blog readers did not elect daugaard/rounds/jackley/joop-ahhh…westerhueis…no, I mean/noem/thune. spencer, ect did. the buck stops with these people
but how can you use ethics laws to undo tax manipulation by republicans? ethics =/= compassionate political dogma
“lacking discernment”…like fur balls, sticks in my throat. its been so peaceful, relativistically, for awhile. here we go again:)
I’m still waiting, Susan, for the Gosch wing to try amending HB 1182 to lift those exemptions. Would that funding method be more fair, less regressive, than raising the general sales tax?
Are all other manufacturers enjoying an exemption from excise tax on equipment and inputs that farmers are not with the machinery tax?
Farmers who rent farms will see increased sales tax on their equipment purchases and no corresponding reduction in property tax since they don’t own the property they farm. All work but no gravy.
Conversely, out of state owners of South Dakota farmland will see a reduction in their property tax yet pay no increased sales tax. All gravy with no work.
The Democrats plan for a full penny sales tax increase with complete removal of the sales tax on groceries is the best plan and elegantly shifts sales tax burden to out of state residents. Sounds like a win to me.
Will automobiles be included in the sales tax increase?
Good question, Greg! I read cautiously and welcome correction:
We levy sales tax under Chapter 10-45; we levy an excise tax of 4% on auto sales under Chapter 32-5B. See specifically SDCL 32-5B-1:
SDCL 32-5B-1 is not included in HB 1182. Folks leasing cars for more than 28 days pay sales tax, so they get hit, but folks buying cars do not pay an additional half-percentage point.
Maybe that puts Senator Frerichs’s argument in a new light: Farmer Fred buying a tractor to feed the world pays an extra $500, but Banker Bob buying a decked out Escalade to go fishing faces no extra burden under HB 1182.
Cory, step 2 in my attempt to increase discernment:
The property tax relief is weighed toward commercial. They get twice the rate decrease tan residential, and about 5 times what Ag gets. The liberal crony corporate capitalists have no problem taxing their customers to fund their tax own cuts and further pad their bottom lines.
Is it too late for House Democrats to side with House GOP conservatives and kill HB1182?
(I hate religious code.)
It is never too late for House Dems to side with GOP conservatives to kill HB 1182. However, we cannot do so to reinforce the intent of the GOP conservatives to kill any boost for teachers. We can only do so on the promise of HB 1182 opponents that they would whole-heartedly back a better, fairer plan like SB 151 that would not favor the crony capitalists and would do more to support our K-12 teachers.
This conservative supported increased teacher pay by using existing sources. If we want to do something about crony capitalism, then we must starve the beast, not feed it. They live on government pork. So take money out of their coffers and move it into teacher pay. Adding $200 million in new taxes and putting that into a general fund controlled by the liberal crony corporate capitalists will mean crumbs for teachers and more campaign funds for the GOP.
One other thing to remember here–South Dakota is the only state in the area that charges sales tax for farm machinery. North Dakota, Minnesota, Iowa, and Nebraska all exempt farm equipment provided the machinery is used for agricultural purposes. South Dakota farmers are already paying 4% more than their neighbors. Can’t really blame Frerichs for trying to draw the line somewhere.
Reasonable point, Foster, about comparisons with other states. But when I advocate for using this opportunity to advocate for tax reform (via repealing the food tax, or maybe doing Bernie Hunhoff’s corporate income tax as funding mechanism), SDEA and other Blue Ribbon advocates say, “No, we can’t complicate the teacher pay issue by reaching for the tax code. We have to go for the simplest, most passable bill.”
In part I agree with the concept of passing the cleanest bill possible to make it happen. But I also recognize that taxes need to be fair. Is Frerichs onto something here? Is the farm machinery tax fundamentally unfair? And if we open the HB 1182 debate to one discussion of tax fairness, do we sandbag it with a discussion of fifty other necessary tax reforms?
I just spotted this on the Budget and Policy Primer on the right side of Cory’s main page:
Promoting responsible and equitable fiscal policies through research and education.
HB1182 Raising Teacher Salaries – how much would taxes change for your Agricultural Operation?
Added February 12th, 2016 by Joy Smolnisky
Raising sales tax by 1/2 cent will raise about $107 million dollars. And decreasing property tax will cost about $40 million dollars. But how much will your agricultural operation pay to support the change? You can figure that out by answering two questions.
Question 1: What is my agricultural land evaluation? (this tax will decrease $10/$100,000 evaluation per year)
Question 2: How much do I spend on equipment subject to sales tax? (this tax will increase 0.5% a year)
Examples for owner occupied residences:
Formula: farm/ranch A farm/ranch B farm/ranch C
+ Property tax decrease $100 $200 $400
– Sales tax increase – $250 – $500 – $1000
Farm/Ranch net tax increase/decrease $150 $300 $600
Farm/ranch A: This farm/ranch has agricultural valuation of $500,000 and equipment purchases of $50,000 per year. Their sales tax increase on ag equipment is $250 and their ag property tax decrease is $100. Their net annual tax increase will be $150.
Farm/ranch B: This farm/ranch has agricultural evaluation of $1,000,000 and equipment purchases of $100,000 per year. Their sales tax increase is $500 and their property tax decrease is 200. Their net annual tax increase will be $300.
Farm/ranch C: This farm/ranch has agricultural evaluation of $2,000,000 and equipment purchases of $200,000 per year. Their sales tax increase is $1,000 and their property tax decrease is $400. Their net annual tax increase will be $600.
$150 tax increase on $500,000 farm
300 on 1 mill. $ farm
600 on 2 mill. $ farm
simple
my health care premium tax increase-$270 and i’m no landed gentry
foster, like workers who are expected to regularly relocate for a better opportunity due to changing conditions, perhaps farmers should relocate to ND
That is the point I have been trying to make on all of these sales tax issues. They all are originally to be funded by property taxes but they keep shifting the burden to those without property, usually the poor, but also the thousands of renters that we have in this state, and who have no increasing value in equity, which is what increased the property tax, before the freeze, in the first place.
except phone and financial companies. see:
10-45-5 and 10-45-6.1 and 10-46-69.1…. except leases of tangible personal property between one telephone company and another telephone company
…. (1) Any eight hundred or eight hundred type service unless the service both originates and terminates in this state;
(2) Any sale of a telecommunication service to a provider of telecommunication services, including access service, for use in providing any telecommunication service; or
(3) Any sale of interstate telecommunication service provided to a call center that has been certified by the secretary of revenue to meet the criterion established in § 10-45-6.3 and the call center has provided to the telecommunications service provider an exemption certificate issued by the secretary indicating that it meets the criterion.
10-46-2.1…. tax may not be imposed on any service rendered by a related corporation as defined in subdivision 10-43-1(11) for use by a financial institution as defined in subdivision 10-43-1(4) or on any service rendered by a financial institution as defined in subdivision 10-43-1(4) for use by a related corporation as defined in subdivision 10-43-1(11).