Undercutting Senator John Thune’s own propaganda, Governor Dennis Daugaard notes a little more factually that the Trump tax plan will have fewer impacts in South Dakota than elsewhere, largely because changes to the state and local tax deduction won’t affect us much since we only have sales tax and property tax to deduct, not income tax. (The House bill eliminates the state and local deduction except a taxpayer’s first $10K of property tax; the Senate plan appears to phase out even that remaining deduction by 2025.)
Governor Daugaard also claims that the current tax code is biased against the middle class, since it’s filled with loopholes and other complications that give rich folks who can afford silk-suit tax lawyers opportunities to weasel out of paying taxes that we regular folks can’t access. The Governor’s statement has some merit, but it doesn’t justify the Trump/Thune plan that sends more wealth up the ladder and ultimately raises taxes on lower- and middle-income South Dakotans.
If Governor Daugaard wants a tax system that favors the middle-class, he should review the tax reforms brought to us by President Barack Obama. The Obama Administration shared Governor Daugaard’s concern that an overly complicated tax system favors the wealthy over the middle class:
Despite the progress that has been made, middle-class families today still bear too much of the tax burden because of unfair loopholes that are only available to the wealthy and big corporations.
In his 2015 State of the Union Address, the President proposed a plan to simplify our complex tax code for individuals, make it fairer by eliminating some of the biggest loopholes, and use the savings to responsibly pay for the investments we need to help middle-class families get ahead and grow the economy [Obama Administration, archived, retrieved 2017.12.04].
I don’t think Daugaard’s Republican pals in Congress leapt at the chance to pass President Obama’s proposed reforms, but President Obama still managed to deliver notable tax relief to the middle class:
Under President Obama’s leadership, we have made substantial progress in making the tax code fairer for working families. Under President Obama:
- A typical family making $50,000 a year received tax cuts totaling $3,600 in President Obama’s first term — more if they were putting a child through college.
- Improvements to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), enacted in 2009 under President Obama and recently made permanent, provide roughly 16 million working families a year with a tax cut of about $900 on average to help make ends meet. Learn more about the bipartisan agreement making these important expansions permanent.
- The American Opportunity Tax Credit (AOTC), first enacted under President Obama in 2009 and recently made permanent, provides families and students paying for college with up to $10,000 of tuition tax credits over four years.
- Bipartisan legislation permanently kept income tax rates low for 98 percent of Americans, while asking the wealthiest households to pay more to help reduce the deficit, including by restoring top tax rates to their levels under President Clinton, and restoring limits on deductions for high-income taxpayers. Learn more about the American Taxpayer Relief Act of 2012.
As a result, middle-class taxes are at historically low levels, with the typical middle-income family paying lower federal income taxes than in almost any other period in the last 60 years. Relative to the tax code in place before the Administration, in 2016 the after-tax income of families in the lowest fifth of the income distribution has increased by more than 6 percent on average — a more than $850 boost — due to the policies enacted since 2009 [Obama Administration, archived, retrieved 2017.12.04].
President Obama worked toward Governor Daugaard’s ideal of fairer taxes for the middle class. It’s too bad Governor Daugaard’s party, with complete control of Congress and the White House, are working to unravel that tax fairness to favor their rich President and their rich friends.
Governor Daugaard has missed his chance to lead this state to a fairer and sustainable tax system. The current system of taxing sales is antiquated, regressive, too cyclical, undermined by the new economy more and more every year, and, maybe most importantly, doesn’t meet even the state’s meager revenue requirements. Was it Rorschach who stated that Daugaard and the legislature have basically instituted an austerity approach to funding state government? I agree with this statement.
Instead of looking at what are the necessary and vital services of state government that must be funded adequately and pursuing revenue sources that would meet those requirements at a minimum. Daugaard and his cronies have tied the state to a regressive and antiquated tax that is slowly dying and plainly not sufficient to meet the bare minimum of the requirements for education and other vital interests of the state. Property taxes are already too high, so there is no good option to raise them.
We just raised the sales tax for teacher pay less than two years ago to get out of 50th place, but soon we will reclaim our traditional spot at the bottom. We raised state education funding by roughly 10% with the sales tax increase, but the effects of this will soon be negated. The first year of the 10% raise was 7% more than the baseline of what a conservative 3% increase would have been for that year. Last year, the legislature gave the schools a .3% increase (not 3%, but .003 expressed as a decimal). That means that the 7% gain from the first year of the sale tax increase was basically reduced again by 3% to a net of 4% at the end of this fiscal year. Now I just heard that Daugaard is again proposing a negligible increase for education in next year’s budget. Thus, the remaining 4% benefit from the sales tax increase will be reduced to 1% better than if we had simply increased education funding at a 3% rate since the time of the sales tax increase. In other words, the progress made in education funding at the time of the sales tax increase will have been almost totally wiped out by the subsequent state austerity budgets. We will once again be the “Mississippi of the North” in short order.
Daugaard had an opportunity to provide some leadership and vision for the future in SD without political repercussions because of his term limited status. Instead of looking to the future with new funding mechanisms and explaining the importance to our future of investments in education and infrastructure, Daugaard is content to rely on the same old broken model of regressive taxation that was abandoned by most states without oil wells. He has allowed the Titanic in the form of our state budget and revenue structure to set sail knowing that the icebergs are looming and the hull has already started leaking precipitously. Every year he tells us how he is moving the deck chairs of our state budget around, but he does not chart a different path that avoids the perils of our doomed voyage. Will the next captain of our state see the folly of our current doomed path to the bottom?
Brilliant assessment of a sad situation, Darin.
Polls on the tax law keep finding that disapproval of the law exceeds approval. Several polls have also shown that few people have noticed an increase in their paychecks due to the measure.
The CBS News poll found that 43 percent of voters approved of the law while 46 percent disapproved. It also found that 62 percent thought the law would either hurt them or have no effect.
A Monmouth University poll conducted late last month found that 40 percent approved of the tax law and 44 percent disapproved. It also found that most Americans think they have been helped only a little or not at all from the growing economy.
Republicans frequently say public opinion on the tax law will rise as people see its benefits, which they say will take time.:
THUNE “I think there’s going to be a delayed effect on the benefits of tax reform because a lot of people, I think, until they file next year, maybe aren’t seeing it directly, particularly if they auto-deposit [their paychecks],” said Sen. John Thune (R-S.D.), a member of Senate GOP leadership and the tax-writing Finance Committee. good republican-boy TALKING POINTS. more of the same….
Rep. Kenny Marchant (R-Texas), a member of the Ways and Means Committee, said that many taxpayers have just finished filing their tax returns this year under the old code. Most of the tax cuts in the law take effect for the taxes people will file next year. http://thehill.com/policy/finance/387184-good-economic-vibes-fail-to-make-gop-tax-law-popular